TDS Penalty and Interest for Late Return Filing For AY 2019-20 By Shiv Kumawat


It is important for every registered taxpayer in India to file their TDS returns on time in order to avoid any penalty and interest for non-deduction or non-payment of TDS. The Indian government levy TDS interest in two scenarios mainly- late or non-payment of TDS and non-deduction of TDS. The detailed explanation for TDS interest applicability in case of non-payment and non-deduction of TDS are given below:

TDS interest in case of late deduction/ non-deduction

For the late deduction of TDS, a 1% interest rate is applicable starting from the date on which the tax was deductible to the actual deduction date. Here is an example to example the same:

A tax deduction of INR 10,000 was made on May 10, 2010. However, the actual deduction date was slated to be January 10, 2010. In such a scenario, the interest would apply for five months, i.e., January, February, March, April, May.

Total TDS interest = INR 10,000 X 1% p.m. X 5 = INR 500

TDS interest in case of late payment/ non-payment

As per the Section 201(1A), for late deposit of TDS post deduction, the taxpayers would be charged with 1.5% TDS interest rate per month. Taxpayers must also note that tax deduction would be on a monthly basis and it would apply from the date on which TDS was deducted, rather than the date on which it was payment was due.

An elated example to explain this is given below:

Let's assume for a TDS deduction of INR 5000 on January 10, the due date of TDS payment is April 19. Somehow, the taxpayer fails to submit the TDS payment on April 19. Now, you must understand that the TDS interest calculation would start from the TDS deduction date, not the payment date. Therefore, in this case, it would be January 10. So, the total TDS interest payable would be for four months, i.e., Jan, Feb, March, April.

Total TDS interest = INR 5000 X 1.5% p.m X 4 = INR 300

Non-deduction of TDS in case of payment made to a Resident Payee:

As per the provisions of Section 201 under the Finance Act, 2012, the taxpayers, who miss paying any part of the tax for the payment made to a resident payee, should be marked as an assessee-in-default for the tax not deducted by them, if following conditions get fulfilled:

  • If the resident payee showcases his returns in the salary under section 139

  • If the resident payee acknowledges and pays his tax dues on the income mentioned under the return of income

TDS Penalty for Late/Short Payment

As per the Prosecution (Sec 276B), if a taxpayer fails to pay the tax that has been deducted under the credit of central government in India under the provision of Chapter XVII-B, then the taxpayer will receive rigorous imprisonment, which would not be less than three months, and can go up to seven years depending upon the fine.

How much fee is charged for delay in furnishing e-TDS statements?

As per the section 234E of Income Tax Act, a mandatory fee of INR 200 will be charged to taxpayers for the delay in furnishing the eTDS statement, which came into effect from July 1, 2012. However, one must note that the total fee deducted cannot exceed that the total amount of TDS deducted for the quarter.

Further, if a payer fails to furnish e-TDS for a year or submit incorrect details like wrong PAN, Challan, etc., then he/she would be fined with a penalty ranging from INR 10,000 to INR 1 lakh as per the guidelines of the assessing officer.

How one can avoid paying such penalties?

In order to avoid such heavy penalty for late filing of TDS, the individuals can easily file their TDS returns through the unrestricted Gen TDS e-Filing Software utility available for five active hours on the website.

What are the conditions in which one avoids paying the penalty for the late filing of TCS/TDS returns (as per section 271H)?

The penalty will not be levied against the late filing of TCS or TDS returns from payers if the following conditions satisfy:

  • The TDS is paid to the credit of the Government.
  • The late filing fees and credit is directly submitted to the government account.
  • The filing of TDS returns needs to be within one year starting from the due date for the same.

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