The government can collect taxes from earners at the source of their income by using the tax deducted at source method (TDS). This approach entails the payer subtracting a specific amount of tax before making a payment to the government on behalf of the payee. The Income Tax Act of 1961 governs the TDS provisions, and as a result of the TDS provisions, a number of notices may be issued.
The various notice kinds that may be sent in accordance with the TDS requirements and the associated fines will be covered in full in this article.
The TDS Provisions provide for the issuance of notifications in the following categories:
When tax is not deducted or is deducted at a rate that is lower than the authorised rate,
This notification for non-deduction or short deduction of TDS is delivered. This notice might be given, for instance, if the applicable TDS rate is 10% and the deductor has only deducted 5% TDS or none at all. The shorting or failing to deduct TDS amount is equal to the penalty for shorting or failing to deduct TDS.
Notice if the tax is withheld but not filed with the government by the deadline or if the TDS is deposited after the deadline but not before.
This letter might be sent, for instance, if the TDS is deducted in June but not remitted with the government by the deadline of July 7. The amount of TDS that is not paid or applied after the due date is the fee for non-payment or late payment of TDS.
Notification for TDS Returns that are Late or Not Filled:
This notice is given when TDS returns are submitted after the due date or after the due date has already passed. For instance, this notification may be given if the TDS reports for the quarter that ended on June 30th are not submitted by the deadline of July 31st. A daily fee of Rs. 200 is imposed for TDS returns that are submitted late or not at all.
When the TDS information on the deductee's tax credit statement and the TDS information that the deductor filed are different,
A Notification of TDS Data Mismatch is sent. This letter might be sent, for instance, if the TDS amount deducted by the deductor is Rs. 10,000 but shows up as Rs. 5,000 in the deductee's tax credit account. Depending on the nature and severity of the mismatch, different penalties apply.
Notification of Invalid or Improper TDS Certificate:
When the deductor issues a TDS certificate that is ineligible or contains misleading information, this notification is given. An alert might appear, for instance, if the deductee's PAN number is missing from the TDS certificate or the amount of TDS stated there is inaccurate. Each incorrect or invalid TDS certificate carries a fine of 10,000 rupees.
There are several fines and punishments for breaking the TDS rules. Let's delve more into the penalties for non-compliance:
1)
TDS Non-Deduction or Short Deduction Penalty: If TDS is not deducted or is deducted at a lower rate than the permitted rate, a penalty is assessed equal to the amount of TDS that is not deducted or short deducted. For example, if the TDS amount is Rs. 10,000 and the deductor has deducted only Rs. 5,000 or nothing at all, the penalty for non-deduction or short-deduction of TDS will be Rs. 10,000.
2)
If the TDS was deducted but not deposited with the government by the requisite due date or if the TDS was submitted late, the penalty for non-payment or late payment of TDS is equivalent to the amount of TDS that was not paid or deposited beyond the due date. For instance, if the TDS amount is Rs. 10,000 and the same is not deposited within the required period, the penalty for non-payment or late payment of TDS will be Rs.
3)
The penalty for failing to file TDS returns on time or filing them late is Rs. 200 per day of the delay. This penalty applies if the TDS returns are not filed by the required due date or are filed late. For instance, a fine of Rs. 2,400 will be imposed if the TDS returns for the quarter that ended on June 30th are not submitted by the deadline of July 31st (i.e. 12 days x Rs. 200).
4)
The severity and kind of the disparity between the TDS data that the deductor submits and the TDS data that is reflected in the deductee's tax credit statement determine the penalty for a TDS data mismatch. If, for example, the TDS amount deducted by the deductor is Rs. 10,000 but is shown as Rs. 5,000 in the deductee's tax credit account, the penalty for such an error is Rs. 5,000.
5)
Penalty for Invalid or Incorrect TDS Certificate: A Rs. 10,000 per certificate fine is imposed if the deductor issues a TDS certificate that is faulty or contains false information. For example, if the certificate lacks the deductee's PAN number or the TDS amount listed in the certificate is incorrect, the penalty for a false or inaccurate TDS certificate is Rs. 10,000.
6)
For late or unpaid TDS, in addition to the previously listed penalty, interest may also be charged. Interest on the amount of TDS is computed at a rate of 1% per month, or portion of a month, from the day the TDS was deductible to the date it is actually deducted. If the TDS is not deposited by the deadline, interest will be assessed from the date the TDS was deducted until the date it is actually deposited at a rate of 1.5% per month, or portion thereof.
Conclusion:
The TDS regulations are an essential part of the income tax system, and noncompliance can have penalties and other repercussions. This makes it essential for you to have a good consultant who can guide you with right steps towards being compliant. Contact us at info@returnfiler.com today to hire one for yourself