Tax Deducted at Source (TDS) is an indirect method of collecting Income Tax. Payer has to deduct tax at source and deposit TDS online with the Income Tax Department within a specified due date and file TDS Return. If TDS is deducted but not deposited by the deductor, the deductor is liable to pay interest and penalties. Therefore, it is very important to file a TDS return on time and make a TDS payment before the due dates.

Due Dates to deposit TDS

*All sums deducted in accordance with the provisions of Chapter XVII-B by an office of the government without challan should deposit the same on the day of deduction. by an office of the Government without challan (Treasury Challan) should be deposited on the same day of deduction.

Consequences of non-deposit of TDS

In case TDS was deducted but was not deposited by the deductor by the correct date, the deductor has to make payment of interest for the late deposit of TDS

1. Late filing fee (for late filing the TDS return)

1. Interest (for late deposit of the TDS)

1. Penalty (if deductor does not file TDS return within one year of the due date)

Interest on delayed TDS deposit u/s 201(1A)

Interest is chargeable on short payment/late payment of TDS. There can be the following scenarios:-

The deductor can make the interest payment on such late payment of TDS before filing TDS returns or demand raised by TRACES.

Penalty for companies that delay TDS returns

All companies, irrespective of government or private, must bear a penalty of Rs.200/day, under section 234E, for the delay in filing TDS or TCS returns after the specified due date. However, such a penalty will not exceed the amount of TDS for which the statement was required to be filed.

Also, a penalty from Rs.10,000 to Rs.1 lakh is leviable under Section 271H if a company provides incorrect information or fails to submit the returns within the specified due date. This penalty will be charged in addition to the penalty under Section 234E.

No penalty under Section 271H will be charged in case of delay in filing the TDS/TCS return if the following conditions are satisfied:

1. The tax deducted/collected at the source is paid to the credit of the government.

2. Late filing fees and interest (if any) are paid to the government's credit.

3. The TDS/TCS return is filed before the expiry of a period of one year from the due date specified on this behalf.

TDS deducted will not reflect in form 26AS

Form 26AS is an important document that shows the records of how much tax has been deposited by your deductor into the government account. When Individuals and organizations deposit the TDS and file a TDS return with the government against your PAN, it automatically shows in your Form 26AS. A payee cannot take a tax credit of the TDS while filing an income tax return. If the payee takes the tax credit for this amount, they will receive a notice from the income tax department for the mismatch in the TDS claimed and taxes paid.

Therefore, It is better to preserve the proofs in relation to TDS such as payslips, bank account statements, any form of other communication done with the employer in this regard, etc. Also, it is suggested to review Form 26AS regularly to confirm whether the TDS was deducted or if the deductor has deposited the TDS.

Remedies to deductee under the Income Tax Law

As discussed, the deductee should preserve the proofs related to TDS deducted and regularly check 26AS on the e-filing portal of Income Tax. If the deductee has valid evidence about the deductor not depositing the TDS, it is best to bring this to his notice before taking further steps. If the deductor does not respond even after repeated requests, the deductee can take action by filing a written complaint to your assessing officer.

Also, to avoid delay from companies in depositing TDS and filing returns, the Central Board of Direct Taxes (CBDT) has become more strict and started imposing penalties on companies that are not complying with the rules. Apart from interest on late payment of TDS, a penalty of INR 200 per day is applicable till the day on which the deductor files the return. Provided that the amount of Penalty will not exceed the number of TDS payable.

Moreover, the Assessing Officer may direct a person who fails to file the return within the due date to pay a penalty minimum of INR 10,000, which may extend to INR 1,00,000. The penalty under this section is also applicable to the cases of incorrect filing of TDS return. Further, If a person fails to pay TDS to the credit of the Central Government, as required, he shall be punishable with rigorous imprisonment for a term which shall not be less than three months but which may extend to seven years and with a fine.