Once tax is deducted on the income paid, the deductor needs to deposit tax And file TDS return for the same. If the tax deductor misses the deadline for depositing the tax deducted and/or Filing TDS Return, then it will have monetary consequences which will have to be borne. Filing of TDS return is important as it is a way of informing the government about the tax deducted from various taxpayers and deposited with the government.

The due date for deposit of tax deducted for one month is 7th of the next month. For tax deducted in the month of March, tax will have to be deposited by 7 April (for the government) and 30 April (for other deductors). TDS returns are required to be filed on quarterly basis, i.e. by 31st July, 31st October, 31st January and 31st May. However, there are some exceptions to this rule.

If the deductor fails to deposit the tax

However, if the deductor fails to deposit the tax deposited or does not submit the TDS return on time, there will be penal consequences for him.

Yashesh Ashar, Partner, Bhuta Shah & Co. LLP – a Chartered Accountant firm says, “If the tax deductor fails to deposit the tax deducted by the due date, interest will be levied. The rate of interest would be charged at the rate of 1.5. % per month from the date of deduction to the date of deposit. Further, if the deductor fails to deduct the tax (if liable), penal interest is also levied. The penal interest is 1% per month from that date on which tax is deductible up to the date on which the tax is actually deducted. Penal interest is leviable under section 201(1A) of the Income-tax Act, 1961. In addition to penal interest, the deductor will be charged under section 276B of the Income-tax Act shall be prosecuted, which may extend to three months to seven years of imprisonment and with fine.”

“Penal interest is applicable to every category of taxpayer i.e. individuals, banks, other financial institutions etc., provided he has either failed to deduct tax or has been deducted but failed to deposit it before the due date Yes. Penal interest is payable. Filing of TDS return,” says Ushar.

If the deductor fails to file TDS return

It may happen that the deductor may have deducted and deposited the tax to the government but failed to file the TDS return. Here too, there are penal consequences if the tax deductor fails to furnish the TDS return on time.

Ashar says, “If a deductor fails to furnish TDS return on or before the due date, he is liable to pay late filing fee under section 234E of the Income Tax Act. Late filing fee of Rs 200 per day Filing fee is levied till the filing of TDS return. Further, the Assessing Officer can impose penalty under section 271H. The minimum penalty amount is Rs 10,000 and the maximum penalty amount is Rs 1 lakh. Note that incorrect filing of TDS return may also attract a maximum fine of Rs 1 lakh.” However, note that the late filing fee cannot exceed the TDS amount.