Interest
Penalty
Assessee-in-default
Interest

Various Types of Interest Charged on TDS / TCS Defaults

1) Failure to deduct / collect or pay TDS / TCS (You will be deemed as Assessee-in-default) [Sec. 201(1)]:

If any person who is liable to deduct TDS (i.e., Deductor) / collect TCS (i.e., Collector), does not deduct / collect the whole or part of tax or after deducting / collecting fails to pay whole or part of tax, then he shall be deemed to be an assessee-in-default. He shall be liable to pay interest (u/s 220) + penalty (u/s 221).


Exception: In case of failure to deduct tax, he shall not be deemed to be an assessee-in-default, if on sum paid to/credited to the account of a resident AND such resident:

  • Has furnished his return of income u/s 139, and
  • has taken into account such sum for computing income in such return of income, and
  • has paid tax due o the income declared by him in such return of income,

AND the deductor furnishes a certificate to this effect from a Chartered Accountant.


2) Late deduction / collection or payment of TDS / TCS [Sec. 201(1A)]:

If any person who is liable to deduct TDS (i.e., Deductor) / collect TCS (i.e., Collector), does not deduct / collect the whole or any part of the tax within the time prescribed or after deducting / collecting fails to pay the tax within the time prescribed he shall have to pay:

  • simple interest @ 1% for every/part of month on the amount of tax, from the date on which such tax was deductible / collectible  to the date on which such tax is deducted / collected AND
  • simple interest @ 1.5% for every/part of month on the amount of tax, from the date on which such tax was deducted / collected to the date on which such tax is actually paid.

Note: Interest for late deduction / collection and late payment of TDS / TCS shall not be levied on a deductor / collector who is deemed as assessee in default for failure to deduct / collect  tax.

Penalty

Various Types of Penalties Levied on TDS / TCS Defaults

Late Filing of TDS / TCS return (Sec. 234E):

If a deductor / collector fails to file the quarterly returns of TDS / TCS within the time prescribed, then he shall be liable to pay penalty of:

Rs. 200 for every day during which the failure continues, subject to maximum of TDS deductible / TCS collectible in the quarterly return.


Penalty for incorrect information or failure to file return (Sec. 271H):

A deductor / collector shall be liable to pay penalty if:

  • he fails to file the quarterly returns of TDS / TCS within the time prescribed OR
  • he furnishes incorrect information in the quarterly returns of TDS / TCS.

Penalty amount = Minimum Rs. 10000 - Maximum Rs. 100000.
This penalty will be in addition to penalty u/s 234E.

Note: No penalty levied in case of delay in filing the return of TDS / TCS, if deductor / collector proves that:
  • after paying the tax deducted / collected along with fees u/s 234E and interest u/s 201
  • he has filed the quarterly returns before the expiry of one year from time prescribed for filing the return.

Penalty for late furnishing of TDS / TCS return (Sec. 272A):

Downloading TDS / TCS certificates after due date of furnishing the certificate  = late furnishing of TDS / TCS certificate

Failure to download certificate of TDS / TCS (from TRACESwithin 15 days from the due date of filing the return will attract penalty amounting to:

Rs. 100 for every day during which the failure continues.

Assessee-in-default

​Assessee-in-default from TDS/TCS aspect

A deductor / collector will be deemed as assesse-in-default in respect to TDS / TCS, if he:

  • fails to deduct / collect tax (whole or any part of tax)
  • fails to pay tax (whole or any part of tax)
  • fails to pay demand (whole or any part of demand) within 30 days of service of Demand Notice

Consequence:
Deductor / collector has to pay interest (u/s 220) + penalty (u/s 221)

Amount of Interest (Sec. 220):
 Simple interest @ 1 % per month on the amount remaining unpaid (calculated from the day immediately following the 30 days (from the the service of Notice) to the date on which payment is made.) 
(Part of month is considered as full month)

Amount of Penalty (Sec. 221): Determined by Assessing Officer, subject to maximum of amount of arrear, i.e., amount remaining unpaid.