[Opinion] Penalty Provisions for Failure to Deduct & Pay TDS to the Account of Central Govt.

CA Motichand Gupta & Balaji Chettiar – [2023] 150 taxmann.com 413 (Article)

Companies are required to secure compliance with provisions relating deduction of tax at source and deposit of same to the credit of Central Government in accordance with Chapter XVIIB of Income-tax Act, 1961 (hereinafter referred as “the Act”). When an assessee who is required to deduct and deposit tax at source as required under ‘the Act’, fails to do so, he attracts interest and penal provisions. There are two separate compliance cast on the assessee namely deduction of tax at source and deposit of tax so deducted. Interest and penal/prosecution provisions are specified for each of this violation under the Act.

Section 201(1A) specifies the interest liability of a person who fails to deduct tax at source and also for failure to deposit the same to the credit of Central Government. The interest liability for non-deduction of tax at source is 1% per month or part of month on the amount of such tax from the date it was deductible to the date on which such tax is deducted. Whereas, interest liability for non-payment is defined at 1.5% per month or part of month on the amount of such tax from the date of deduction to the date of actual payment of such tax to Central Govt.

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