Penalties for Late Filing TDS Return

With each quarter drawing to a close in a matter of a few months, it becomes important that one is vigilant about filing Income Tax returns and TDS on time. A compliant taxpayer will ensure that he or she avoids any unnecessary interest payment or late fee payments and ensures that his or her legal obligation is duly fulfilled. 

TDS Return is a statement that is submitted by the deductor to the income tax department on a quarterly basis which summarises all the different headings for a specific quarter. This must be submitted using the relevant form filled with all the requisite details and on time, by the deductor on the TRACES portal of the Government of India. The process is made in such a manner that it will pose minimum challenges at the consumer end and at the same time make the work of the income tax department easier and more efficient.

Penalties that are Applicable for the Late Filing

But before we understand the penalties that are to be paid, it is important to know the due dates for filing the TDS returns. They are summarily presented in the table below – 

One has the additional liability of paying the late filing fee if the TDS return is not filed within the deadline; he or she also has to pay interest if the TDS return amount is not deposited on time; and will also have to pay a penalty if the TDS return is not filed within one year of the due date.

In terms of the late filing fee, one has to pay a fine of INR 200 per day until the return is filed as per Section 243E of the Income Tax Act. For example, the TDS payable amount is calculated to come up to INR 7,500 on May 14, and the amount is paid on November 19, the total number of days between the two dates is 190. Therefore, INR 200 per day for 190 days will be INR 38,000. However, since your TDS payable amount is INR 7,500, your late filing fees will be only INR7,500 and not INR 38,000. But do remember that interest will be charged by the income tax department.

Interest has to be paid as per Section 201A of the Act. If there is non-deduction of tax at source either in whole or in part, then an interest of 1% per month is to be paid from the due date to the date the tax is actually deducted. If after the deduction of the tax, there is non-payment of the tax either in whole or in part, then an interest of 0.75% per month will be levied for the first few months and an interest rate of 1.5% per month thereafter. 

Also, the interest is calculated on a monthly basis irrespective of the fact that there are only a few days left in the month. To illustrate, say the TDS payable by an individual is INR 7,500 and the date on which it was deducted is January 14. The TDS was finally paid on May 18. The interest to be charged to the individual shall be calculated as INR 7,500 x 1.5% per month x 5 months which will amount to INR 562.5.

Due to COVID, the penalty provisions have been greatly relaxed. Chapter XVIIB of the Act states that there has been a punishment of rigorous imprisonment for a term which shall not be less than three months but which may extend to seven years and with a fine for non-payment of TDS returns or for incorrect filing of returns. 

Section 271H in particular states that an assessing officer may direct the assesses to pay a minimum penalty of INR 10,000 which may be extended to INR 1,00,000 (in addition to the late filing fee). But such a penalty will not be imposed if the tax deducted at source is paid to the credit of the government or if the late filing fees and the interest is paid to the government and if the TDS is filed before the expiry of one year from the due date specified.

Conclusion 

One must not wait endlessly to file his or her TDS Returns. It is a duty that one must fulfill with utmost diligence and promptness. In case of doubt, contact the income tax department’s helpline number or seek the assistance of a Chartered Accountant or a tax professional.