The following table highlights the applicable provisions and implications of non-compliance with TDS / TCS requirements, including failure to deduct, collect or deposit tax :
| Nature of Default | Old Section (IT Act, 1961) | New Section (IT Act, 2025) | Consequence |
|---|---|---|---|
| Failure to deduct and /or deposit TDS | Section 201(1) | Section 398(1) | Equal to tax amount deductible but not deducted |
| Interest for failure to deduct tax at source | Section 201(1A) | Section 398(3)(a)(i) | Interest @ 1% per month or part thereof |
| Interest for failure to deposit tax deducted at source | Section 201(1A) | Section 398(3)(a)(ii) | Interest @ 1.5% per month or part thereof |
| Penalty for failure to pay deduct tax at source | Section 271C | Section 448 | Equal amount of tax deductible but not deducted |
| Failure to collect and /or deposit TCS | Section 206C(6A) | Section 398(1) | Equal to tax amount not deposited |
| Interest for failure to collect tax at source | Section 201(1A) | Section 398(3)(a)(i) | Interest @ 1% per month or part thereof |
| Interest for failure to deposit tax deducted at source | Section 201(1A) | Section 398(3)(a)(ii) | Interest @ 1.5% per month or part thereof |
| Penalty for failure to pay tax collected at source | Section 271C | Section 448 | Equal amount of tax deductible but not deducted |
| Failure to pay tax deducted at source to Central Government | Section 276B | Section 476 | Rigorous imprisonment for a term for a minimum of 3 months which may extend to 7 years and with fine |
| Failure to apply for TAN No. u/s 203A | Section 272BB | Section 468 | Penalty of Rs. 10000 |
| Failure to furnish prescribed statements u/s 200(3) | Section 272A(2)(k) | Section 397(3)(b) | Penalty of Rs. 200 every day during which the failure continues subject to maximum of TDS amount |
| Failure to issue TDS certificate u/s 203 | Section 272(A)(g) | Penalty of Rs. 100 every day during which the failure continues subject to maximum of TDS amount | |
| Failure to furnish statement of perquisite or profit in lieu of salary u/s 192(2C) | Section 272(A)(i) | Penalty of Rs. 100 every day during which the failure continues subject to maximum of TDS amount | |
| Failure to mention PAN of the deductee in the TDS statements and certificates | Section 272B | Section 467 | Penalty of Rs. 10000 |
The penalty structure for TDS defaults under the new IT Act sounds noticeably stricter compared to the old sections. Good to have this laid out side by side for quick reference when advising clients. Thanks for keeping this updated with the current provisions.
The consequences of TDS defaults under the new IT Act 2025 are significantly more severe than many small business owners realize — the combination of interest, penalties, and prosecution risk makes compliance a genuine priority rather than optional. The table format you’ve used to compare old vs. new sections makes this dense regulatory content much more readable.
Useful summary of the consequences of TDS defaults — spelling out the interest, late fees and disallowance in one place is really handy at filing time. Bookmarking for the next quarter, thanks.
Good insights here. I’ve been researching this area recently and this is one of the more grounded explanations I’ve found.
Relating to which financial year are these legal provisions?
The article has now been updated with provisions as per the Income Tax Act, 2025, and the corresponding sections have also been mapped with the earlier Act for better clarity.
This post is a great reminder of how complex the TDS system can be for businesses. Keeping track of deadlines and ensuring correct deductions are made is key to avoiding these hefty penalties. What steps would you recommend for companies to ensure they’re always on track?
First of all TDS is not complicated – it is quite straight forward. Most important is the discipline element that must be strictly followed. Will suggest you to read the following blogs which recommends steps for always remaining on track: