In the charming coastal state of Goa—famous for its hospitality, tourism, real estate, and vibrant SME sector—businesses must stay sharp when it comes to tax compliance. One crucial yet commonly overlooked area is Tax Deducted at Source (TDS). Non-compliance with TDS regulations under the Income Tax Act, 1961, not only attracts interest and penalties but can also trigger criminal prosecution.
This article explores the most common TDS defaults among Goa-based businesses, why they happen, the legal consequences involved, and most importantly—how to prevent them.
(Relevant Sections: 234E, 271H)
One of the most frequent defaults seen in Goa's business environment is delayed filing of TDS returns. Quarterly TDS returns (Form 24Q, 26Q, etc.) must be filed within prescribed timelines. Delays attract both fees and penalties.
Late Fee (Section 234E): ₹200 per day of delay until the return is filed. This continues until the fee equals the amount of TDS.
Penalty (Section 271H): The Assessing Officer may levy a penalty ranging from ₹10,000 up to ₹1 lakh for failure to file or incorrect filing.
If the deductor proves that:
TDS is deposited to the government,
Late fee and interest (if any) are paid, and
Return is filed within one year of the due date,
then penalty under Section 271H may not be imposed.
(Relevant Sections: 201(1A), 201(1))
Businesses often deduct TDS but delay depositing it to the government. Goa's small enterprises and seasonal businesses sometimes postpone payment due to cash flow issues. However, the law is strict on timely remittance.
Interest for Late Deduction: 1% per month (or part of a month) from the date it was deductible to the date actually deducted.
Interest for Late Deposit: 1.5% per month from date of deduction to date of actual deposit.
The interest is mandatory and non-discretionary.
(Relevant Sections: 221, 271C, 272A, 272BB)
While interest is compensatory, penalties are punitive. Many Goa-based businesses assume paying interest is enough—but that’s not the case. There are additional sections under which penalties may be imposed.
Section 221: Penalty up to the amount of tax in arrears if a business is deemed “assessee in default”.
Section 271C: Equal to the amount of TDS that was not deducted or paid.
Section 272A(2)(g): ₹100 per day for failure to issue TDS certificates.
Section 272BB: ₹10,000 for not obtaining a valid TAN or quoting an incorrect TAN.
Each of these penalties applies independently and can stack up quickly.
(Relevant Sections: 40(a)(i), 40(a)(ia))
TDS default doesn't just attract penalties—it can also lead to disallowance of business expenses, increasing taxable profits.
Payments to Non-Residents (Section 40(a)(i)): Entire expense is disallowed if TDS is not deducted or deposited.
Payments to Residents (Section 40(a)(ia)): 30% of the expense is disallowed in the year of default.
This means even genuine business expenditures can be ignored for tax deduction if TDS isn't properly handled—significantly increasing tax outgo.
(Relevant Sections: 276B, 277, 278)
For serious cases, especially where TDS is deducted but not deposited, the Income Tax Department can initiate criminal prosecution. The law sees TDS as trust money—meant to be collected on behalf of the government.
Section 276B: Rigorous imprisonment from 3 months to 7 years plus fine for failure to deposit TDS.
Section 277: Providing false statements can lead to imprisonment of 6 months to 7 years.
Section 278: Assisting in filing false TDS statements (abetment) can also invite prosecution.
Goa businesses that are casual or unaware of their TDS responsibilities may unintentionally commit offenses that attract serious legal consequences.
The seriousness of the issue was highlighted when, in a notable crackdown, the Income Tax Department issued over 850 prosecution notices to businesses across Goa and Karnataka for TDS-related offenses.
223 cases resolved through compounding—where businesses paid due tax, interest, and penalty.
48 cases moved to full prosecution, indicating no leniency was offered.
This sends a strong message: TDS defaults aren’t just compliance lapses—they can become criminal matters.
Buyers must deduct 1% TDS when purchasing immovable property.
If the seller’s PAN isn’t linked with Aadhaar, the CPC system may demand 20% TDS, treating PAN as invalid.
Many buyers have received default notices, even though fault lies with the seller.
❗ Example: A buyer in Goa received a 20% TDS demand because the seller had not linked PAN with Aadhaar, although 1% TDS was already paid.
TDS at 5% must be deducted on monthly rent exceeding ₹50,000.
If not deducted, the tenant is liable as a deductor in default.
Relief can be obtained if:
Landlord has filed ITR,
Rental income is declared, and
Form 26A is submitted, certified by a Chartered Accountant.
✅ This process ensures the tenant is not treated as defaulting if landlord has met tax obligations.
Many of the defaults arise not from malice but from practical challenges and misunderstandings:
Lack of Awareness: SMEs may not be well-versed in TDS laws or compliance deadlines.
Clerical Mistakes: Incorrect PAN, TDS rate errors, or filing incorrect forms are surprisingly common.
Cash Flow Crunch: Seasonal businesses like shacks or hotels may delay TDS payments during off-peak months.
KYC Gaps: In real estate, buyers often suffer due to sellers' non-compliance with PAN/Aadhaar linkage.
Wrong Assumptions: Many believe freelancers and consultants can be paid without TDS—this is incorrect.
With consistent discipline and a few smart steps, most TDS problems can be avoided.
Deduct and Deposit TDS On Time: Always. Use automated reminders or software.
Verify PAN-Aadhaar Status Before Property Deals: Avoid surprise 20% TDS notices.
Apply Correct TDS Rates: Differentiate between freelancers (10%) and contractors (1% or 2%).
Issue TDS Certificates Promptly: Form 16, Form 16A to be issued within 15 days after quarterly filing.
File TDS Returns Correctly: Double-check before filing—especially name, PAN, and deduction amount.
Use Form 26A for Relief: If recipient has paid taxes, you may avoid being treated as a defaulter.
Keep Documentation Ready: Especially in rent and property transactions.
Hire Professional Help: Chartered accountants can help ensure end-to-end compliance.
Apply for Compounding in Case of Default: Better than facing full prosecution.
Use the Reasonable Cause Clause (Section 273B): Defend against penalties
As highlighted throughout this article, TDS compliance is not just a statutory requirement—it’s a cornerstone of responsible financial governance. The common defaults observed among Goa-based businesses—whether delayed filings, incorrect deductions, or non-deposit of TDS—may seem minor at first, but they carry serious financial, legal, and reputational risks.
With Goa emerging as a vibrant hub for tourism, real estate, and startups, it's more important than ever for businesses to prioritize tax compliance. Modern systems like CPC and AI-based monitoring are flagging defaults faster and more accurately, leaving little room for oversight or delay.
The good news? These issues are entirely preventable. With the right knowledge, timely action, and expert assistance, businesses in Goa can remain fully compliant, avoid penalties, and build long-term trust with regulators.
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