Interest for Delay in Payment of
TDS/TCS and For Non-Payment of Tax Demanded Introduction
In this article we have discussed
various provisions relating to interest under section 201(1A) for failure to
deduct tax at source/delay in payment of tax deducted at source (TDS) and
interest under section 206C (7) for failure to collect tax at source/delay in
payment of tax collected at source (TCS).
Basic provisions relating to due date
of payment of TDS to the credit of Government
Before understanding the provisions
relating to levy of interest for failure to deduct tax at source/delay in
payment of TDS, it is important to first understand the provisions relating to
the due date for payment of TDS to the credit of the Government account.
Section 192 to 195 gives various items of payments on which tax is to be
deducted by the payer. The tax deducted by the payer (i.e., a non-Government
payer) is to be paid to the credit of the Government as follows:
·
Tax deducted during the month of April to February should be paid to the
credit of the Government on or before 7 days from the end of the month in which
the deduction is made.
·
Tax deducted during the month of March should be paid to the credit of
the Government on or before 30th day of April.
Note:
Tax deducted under section 194-IA
(i.e., on immovable property) should be paid to the credit of the Government on
or before 7 days from the end of the month in which deduction is made.
Interest for failure to deduct tax at
source/delay in payment of TDS
As per section 201, if any person who
is liable to deduct tax at source does not deduct it, or after so deducting
fails to pay, the whole or any part of the tax to the credit of the Government,
then, such person, shall be liable to pay simple interest as given below:
·
Interest shall be levied at 1% for every month or part of a month on the
amount of such tax from the date on which such tax was deductible to the date
on which such tax was deducted.
·
Interest shall be levied at 1.5% for every month or part of a month on
the amount of such tax from the date on which such tax was deducted to the date
on which such tax was actually remitted to the credit of the Government.
In other words, interest will be
levied at 1% for every month or part of a month for delay in deduction and at
1.5% for every month or part of a month for delay in remittance after
deduction.
Interest in case if the deductee has
paid the tax
As per section 201, a payer who fails
to deduct whole or any part of the tax at source is treated as an
assessee-in-default. However, by virtue of proviso inserted to section 201 by
the Finance Act, 2012 with effect from 1-7-2012 the payer who fails to deduct
the whole or any part of the tax on the payment made to a resident payee shall
not be deemed to be an assessee-in-default in respect of tax not deducted by
him, if the following conditions are satisfied:
·
The resident recipient has furnished his return of income under section
139.
·
The resident recipient has taken into account the above income in its
return of
·
The resident recipient has paid the taxes due on the income declared in
such return of income.
·
The resident payee furnishes a certificate to this effect from an
accountant in Form No. 26A.
In other words, in case of non-deduction
of tax at source or short deduction of tax, in case of a resident payee, if all
the discussed conditions are satisfied, then the payer will not be treated as
an assessee-in-default. However, in such a case, even if the payer is not
treated as an assessee-in-default, he will be liable to pay interest under
section 201 (1A). In this case, interest shall be payable from the date on
which such tax was deductible to the date of furnishing of return of income by
such resident payee. Interest in such a case will be levied at 1% for every month
or part of the month.
Non filing of TDS statement without
payment of interest
Every deductor has to furnish
quarterly statement in respect of tax deducted by him i.e., TDS return. As per
section 201(1A), interest for delay in payment of TDS should be paid before
filing the TDS return.
Basic provisions relating to due date
of payment of TCS to the credit of Government
Section 206C gives various items on
which tax is to be collected at source. The tax so collected is to be paid to
the credit of the Government within a period of 7 days from the last day of the
month in which the tax is collected at source. Where it is collected by an
office of the Government then it shall be paid to the credit of the Central
Government on the same day.
Interest for failure to collect tax
at source/delay in payment of TCS
As per section 206C (7), if the
person responsible for collecting tax does not collect the tax or after
collecting the tax fails to pay it to the credit of Government within the due
date prescribed in this regard, then he shall be liable to pay simple interest
at the rate of 1% per month or part thereof on the amount of such tax. Interest
shall be levied for a period from the date on which such tax was collectible to
the date on which the tax was actually paid.
Interest in case if the buyer or
licensee or lessee has paid the tax
As per section 206C (6A), a payer who
fails to collect whole or any part of the tax at source is treated as an
assessee-in-default. However, by virtue of proviso inserted to section 206C (6A)
by the Finance Act, 2012 with effect from 1-7-2012 a collector who fails to
collect the whole or any part of the tax at source (other than TCS on
jewellery/bullion) shall not be deemed to be an assessee-in-default in respect
of tax not collected by him, if the buyer or licensee or lessee from whom tax
is to be collected satisfies the following conditions:
·
Has furnished his return of income under section 139.
·
Has taken into account such amount for computing income in such return
of
·
Has paid the tax due on the income declared by him in such return of
income.
·
Has furnished a certificate to this effect from an accountant in such
Form No.27BA.
In other words, in case of non-collection
of tax at source or short collection of tax (other than TCS on jewellery/bullion),
if above conditions are satisfied, than the person responsible to collect tax
at source will not be treated as an assessee-in-default in respect of tax not
collected or short collected by him. However, in such a case, even if the
person responsible to collect tax at source is not treated as an assessee-in-
default, he will be liable to pay interest under section 206C(7). Interest
shall be payable from the date on which such tax was collectible to the date of
furnishing of return of income by such buyer or licensee or lessee. Interest in
such a case, will be levied at 1% for every month or part of a month.
Non filing of TCS statement without
payment of interest
Every collector has to furnish
quarterly statement in respect of tax collected by him i.e., TCS return. As per
section 206C(7), interest for delay in payment of TCS should be paid before
filing the TCS return.
Interest for non-payment of tax as
per demand notice
Before understanding the provisions
for levy of interest in case of non-payment of tax demanded as per demand
notice issued under section 156, it is important to first understand the
provisions of section 220(1) relating to payment of tax as per demand notice.
As per section 220(1), when a demand
notice under section 156 has been issued to the taxpayer for payment of tax
(other than notice for payment of advance tax), then such amount shall be paid
within a period of 30 days of the service of the notice at the place and to the
person mentioned in the notice. In certain cases, the above period of 30 days
can be reduced by the tax authorities with the approval of designated
authorities.
Section 220(2) deals with payment of
interest in case of failure to pay tax within the time specified in the demand
notice. As per section 220(2), if the taxpayer fails to pay the amount
specified in any notice of demand issued under section 156 (as discussed)
within the period as allowed in this regard, then he shall be liable to pay
simple interest at 1% for every month or part of a month. Interest shall be
levied for the period commencing from the day immediately following the end of
the period mentioned in the notice and ending with the day on which the amount
is paid.
After processing of TDS/TCS
statements an intimation is generated specifying the amount payable or
refundable. Such intimation shall be deemed as notice of demand under Section
156. Failure to pay such tax specified in intimation shall attract interest
under Section 220(2).
It is provided that where interest is
charged under sub-section (1A) of section 201 on the amount of
tax specified in the intimation issued under sub-section (1) of section
200A for any period, then, no interest shall be charged under Section
220(2) on the same amount for the same period.
It is also provided that where
interest is charged under sub-section (7) of section 206C on
the amount of tax specified in the intimation issued under sub-section (1) of section
206CB for any period, then, no interest shall be charged under sub-section (2)
on the same amount for the same period.
Appeal filed to challenge the demand
notice
Where any notice of demand has been
served upon an assessee and any appeal or other proceeding, as the case may be,
is filed or initiated in respect of the amount specified in the said notice of
demand, then, such demand shall be deemed to be valid till the disposal of the
appeal by the last appellate authority or disposal of the proceedings, as the
case may be, and any such notice of demand shall have the effect as specified
in section 3 of the Taxation Laws (Continuation and Validation of Recovery
Proceedings) Act, 1964 (11 of 1964).]
Variation in amount of interest in
certain cases
Where as a result of an order under
section 154, or section 155, or section 250, or section 254, or section 260, or
section 262, or section 264 or an order of the Settlement Commission under
section 245D(4), the amount on which interest was payable under section 220(2)
had been reduced, the interest shall be reduced accordingly and the excess
interest paid, if any, shall be refunded.
However, if subsequently as a result
of an order passed under the said sections or under section 263, the amount on
which interest is payable is increased, the assessee shall pay interest from
the day immediately following the end of the period mentioned in the first
notice of demand and ending with the day on which the amount is paid.
Waiver of interest under section
220(2A) by Commissioner
The Principal Chief Commissioner or
Chief Commissioner or Principal Commissioner or Commissioner may reduce or
waive the amount of interest paid or payable by the taxpayer under section
220(2), if he is satisfied that:
·
Payment of such interest has caused or would cause genuine hardship to
the
·
Default in the payment of the amount on which interest has been paid or
was payable, was due to circumstances beyond the control of the taxpayer.
·
The taxpayer has co-operated in any inquiry relating to the assessment
or any proceeding for the recovery of any amount due from him.
