Section 201 (1a) of Income Tax Act talks about the provisions for the delay in the payment of the tax collected by the deductor/collector. After the tax is deducted by the deductor it must be deposited in the government account within a set time period. When failed, the person in question or liable to deposit the collected amount is imposed with interest, fine, or even prosecution, when failed to not give a good reason for the delay.
Let’s look at this section 201 (1A) for more clarity.
What is Section 201 of income tax?
According to this section, if a person liable to deduct tax does not deduct TDS on time or did not deposit the collected TDS in parts or in whole in the government account he/she is liable to pay simple interest at 1 to 1.5 % based on the criteria discussed below.
What is the interest rate for late payment of TDS?
The interest rate for the delay in payment of TDS is as follows:
- In case when the TDS is not deducted on time: An interest of 1% will be imposed for every month or part of the month, on the amount yet to be deposited from the date it was deducted to the date it’s actually being paid.
- In case when the TDS/tax deducted is not deposited on time: An interest of 1.5% will be imposed for every month or part of the month, on the amount of tax yet to be deposited from the date it should have been deposited to the date it is actually being credited in the government account.
As per section 201, a payer who fails to deduct the whole or part of TDS is treated as an assessee-in-default. There are some conditions in which it’s not true, and the deductor is not treated as an assessee by default. Here are those conditions:
- If the recipient has furnished his return of income under section 139.
- If the recipient has shown the above income in its return of income.
- If the recipient has paid the due taxes on the income declared in such return of income.
- If the recipient has a certificate to this effect from an accountant in Form No. 26A.
However, even in such cases, the payer is liable to pay interest under section 201(1A), at 1% on the amount of tax from the date the tax was to be deducted to the date of furnishing of return of income by such payee. The interest will be charged for each month or part of the month in which the tax was not deducted/deposited.
In case of non-deduction of TDS or short deduction of tax, in case of the payee, if all the conditions are satisfied then only the payer will not be treated as an assessee-in-default.
How do I pay late fees for TDS return?
The provisions for the late TDS/TCS return filing are covered under section 234E of the Income Tax Act. Under this section, if a taxpayer fails to file the TDS/TCS return before the due date, then he is liable to pay a fee of Rs 200 per day till the date on which the return is filed.
The total amount of the late fee must not exceed the TDS/TCS amount to be paid.
To pay the late fees follow these steps:
- Go to the TRACES portal and log in with your credentials.
- Download the justification report and see the outstanding amount.
- Now, download Challan ITNS 281. Fill it up and you can opt to make payment in the bank or online.
- Then, download the Conso File from the TRACES portal.
- Enter the late payment under the Fee column with RPU Ver. 3.8. And generate the FVU.
- Then, submit the correction statement at TIN Facilitation Centre or submit it to the online correction facility to pay the demand.
Calculation of the pending amount/tax to be paid is a bit complicated process. So, take professional advice if needed.
Can TDS late filing fees be waived?
The TDS late fee/penalty can be waived off by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner under section 220(2A) of the Income Tax Act.
As per section 220 (2A) if the taxpayer satisfies the following conditions, the late fee can be waived or reduced:
- If the payment of interest has caused or would cause reasonable hardship to the taxpayer.
- If the delay in the amount of tax paid is because of circumstances beyond the control of the taxpayer.
- If the taxpayer has been part of any inquiry relating to the assessment or any proceeding for the recovery of any amount due from him.
The time limit for passing an order by the chief commissioner or commissioner under section 220 (2A) is 12 months from the month in which the application was received to waive off the fees by the taxpayer.
The Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner can either accept or reject the assessee’s application.
FAQ- Section 201 (1a) of Income Tax Act
What if interest is not paid for late payment of TDS?
When the interest is not paid for the late payment of TDS a simple interest of 1.5% is levied on the amount pending to be paid, for the month or part of the month in which the interest should have been deposited to the date or month in which it is actually paid/ credited in the government account.
As discussed above Section 201 (1A) covers the provisions for the failure in deducting TDS/TCS and interest under section 206C (7) for failure to collect TDS/TCS. An interest of 1% to 1.5% is charged from the date of the month or part of the month at which the TDS/TCS should have been deducted to the date of the month or part of the month on which the actual payment is done. The collected amount is credited to the government account. The late fees/interest can be waived or reduced by the chief commissioner under specific conditions.
Advance Income Tax (Guide 2023)