TDS Compliances

Mandatory to deduct tax

Under the Income-tax Act, every person making payment or crediting income of specified types to another person is required to deduct a specific proportion of amount payable/creditable at the time of making payment or giving credit, whichever is earlier and deposit the sum so deducted. However, no TDS has to deducted if the person making the payment is an individual or HUF whose books are not required to be audited.

Payments requiring tax deduction at source

Section 200 of the Act specifies a list of payments which require deduction of tax at source. From the viewpoint of Voluntary Organisations, the following are the important payments, in respect of which tax must be deducted at source for the previous year 2023-24 (AY 2024-25) .

Income Tax Slab – Tax Rates

Other important payments on which TDS is required to be deducted, and rated thereon:

Deposit of tax deducted at source

The tax deducted at source is required to be deposited to the credit of the Central Government within the stipulated time limit. Whenever, TDS is deposited assesse should quote TAN. Such deposit can be made by following modes:

1) Electronic mode (mandatory for):

• All corporate assesses; and
• All assesses (other than company) to whom provisions of section 44AB of the Income Tax Act, 1961 are applicable.
  Payment can be made by clicking on following link: https://www.incometaxindia.gov.in/Pages/tax-services/pay-tax-online.aspx

2) Physical Mode: By furnishing the Challan 281 in the authorized bank branch.

The time limit for depositing the amount of TDS is as under:

• For salary: by 7th of next month except for the month of March where the due date is 30th of April.
• For other payments: by 7th of next month except for the month of March where the due date is 30th of April.

TDS return

All organisations responsible for deduction of tax at source are mandatorily required to submit to the prescribed income tax authority a return(s) within a stipulated period after the end of the quarter/financial year. The relevant return form and the month by which it should be filed are as under:

Issue of certificate

Under section 203, the organisation deducting TDS is required to issue a certificate to the person from whose income, tax has been deducted. This certificate will enable the person to claim credit for such tax deducted in his/her return of income. Organisations can prepare the certificate in their own stationery but in the prescribed form. Following are the forms that required to be issued:

Consequences of non- compliance of various provisions

Disallowance of expenditure

Section 40a(ia) of Act provides that, failure to make deduction at source from payment of specified nature or failure to make payment to the account of the Central Government on or before due dates specified in section 139(1), attracts disallowance 30% of such payments in the hands of the payer. Deduction of such sum is, however, allowed in the computation of income if tax is deducted, or after deduction, paid in any subsequent year in computing the income of that year.

Payment of specified nature includes, “commission or brokerage, fees for technical services, professional services, work, rent and payment of royalty”.

Interest, Penalties & Punishment

Failure to deduct income-tax at source on various payments as discussed may attract interest, penalty and even severe punishment.

• If an organisation does not deduct tax the tax then interest @ 1% per month would be levied on the tax not deducted from the date on which such tax was deductible to the date on which such tax is deducted, under section 201(1A).
• If an organisation does not paid the amount deducted then interest @ 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 is actually paid 201(1A).
• The Income Tax Department may also levy penalties to the extent of the amount of tax not deducted in cases of failure to deduct tax, under section 271C.
• A fine of Rs 200 per day is required to be paid if the returns required to be furnished under section 206 are not filed. This amount has to be paid for each day till the default continues but total shall not exceed TDS amount deductible.
• If the tax is deducted but not deposited in favour of the Central Government as per the provisions of the Income-Tax Act, then the principal officer can be punished with imprisonment for a period of 3 month to 7 years with fine.
• If the returns required to be furnished under section 206 are not filed then a penalty of Rs. 100 per day may be imposed for each day of default, under section 272A. However, the assessing officer shall give an opportunity of being heard before imposing the penalty under this section