Late Filing Fees Under Section 234E
The most immediate consequence of not filing your TDS returns on time is the imposition of late filing fees under Section 234E of the Income Tax Act. The fee is charged at Rs. 200 per day from the due date until the date of actual filing. This fee continues to accumulate daily until the full payment is made or until the penalty equals the total amount of TDS payable.
For instance, if your TDS liability is Rs. 10,000 and you file the return 30 days late, your penalty will be Rs. 6,000 (Rs. 200 * 30 days). However, the total late fees cannot exceed the amount of the TDS itself.
Interest on Late Payment of TDS
In addition to the late filing fees, if there is a delay in depositing the TDS amount to the government, interest will be levied under Section 201(1A). The interest is charged as follows:
- 1% per month for late deduction of TDS
- 1.5% per month for late payment of TDS to the government
The interest is calculated for every month or part of the month from the due date of deduction/payment to the actual date of deduction/payment.
For example, if your TDS deduction date was March 1st and you paid the TDS on April 15th, the interest will be charged for two months (March and April).
Penalty Under Section 271H
Apart from the late filing fees and interest, a penalty may also be imposed under Section 271H if the TDS return is not filed within one year from the due date. The penalty for such a delay can range from Rs. 10,000 to Rs. 1,00,000, depending on the severity of the delay and whether the incorrect TDS return is corrected.
Disallowance of Expenses
If the TDS returns are not filed on time, the expenses on which TDS was applicable may be disallowed as a deduction while computing taxable income. This means that businesses can lose the benefit of deductions and may end up paying more tax than required.
For example, if a company deducts TDS on salary or contractor payments but fails to file returns, those expenses might not be allowed as legitimate business expenses for that year, leading to a higher tax liability.
Difficulty in Obtaining a Tax Clearance Certificate
Non-compliance with TDS filing can also create problems when the company or individual applies for a tax clearance certificate. Without this certificate, certain transactions like property sales, fund transfers, or obtaining loans may be halted, disrupting your business operations.
Prosecution for Willful Default
In extreme cases where the non-filing of TDS returns is seen as a deliberate attempt to evade taxes, the Income Tax Department can initiate prosecution under Section 276B. This could result in imprisonment for a term that may range from three months to seven years.
Impact on Your Business Reputation
Finally, non-compliance with TDS regulations can negatively impact your company’s reputation. Whether you’re working with clients, vendors, or financial institutions, being known for defaulting on tax obligations can damage trust and hinder potential business opportunities.
Conclusion: Timely TDS Filing is Crucial
Filing your TDS returns on time is a crucial aspect of tax compliance for businesses and individuals alike. The penalties, fees, and legal consequences of delayed TDS return filings can be severe, leading to significant financial strain. To avoid these hassles, it’s important to stay on top of your TDS due dates and ensure timely payment and filing.
If you’re worried about missing deadlines or staying compliant with TDS regulations, Accotale is here to help. Our expert tax consultants will handle your TDS return filings with precision and efficiency, ensuring that your business stays compliant without any delays.
Feel free to reach out to us for assistance with TDS return filings and other accounting or compliance-related services.