The document discusses the consequences of defaulting on tax deducted at source (TDS) obligations in India. 1) Amounts are not deductible as business expenses if TDS was deductible but not deducted, or deducted but not paid on time. 2) Penalties include treating the defaulter as the assessee in default, imposing penalties equal to the tax amount in arrears plus interest of 1% per month. 3) Criminal penalties including imprisonment of up to 7 years and fines may apply for failure to deduct and pay TDS amounts.

1. Consequences of Default BY C A S H A I L E S H R A T H I ACA, M.Com B A H E T I & S O M A N I Chartered Accountants www.bandsindia.com

2. Consequences of Default Amounts not deductable u/s 40(a)(ia) in computing the income under Profit and Gains of business or profession. i) When TDS is deductable and has not been deducted. ii) After deduction, has not been paid during the previous year or time prescribed. - For Non Government Payer Within one week from last day of the month in which deduction is made or credited on the date of making up of accounts upto within 2 months of the expiry of the said months, except - Salary (192) winning from Lottery (194), winning from Horse Racing (194BB), payment of NSS (194EE) Repurchase of Mutual Fund (194F)

3. Consequences of Default Amounts not deductable u/s 40(a)(ia) in computing the income under Profit and Gains of business or profession. However, the deduction is allowed for the Expenditure made in the month of March and TDS on the same has been paid before filing of Return or Due date of filing of return. And in all other case before last date of financial year.

4. Consequences of Default 2010-11 07.04.2010 07.04.09 26.04.09 26.06.08 Not Deductible Not Deducted 07.04.10 Not Deducted 26.03.10 2010-11 07.10.10 07.04.10 26.03.10 26.03.10 2009-10 07.06.10 31.05.10 31.03.10 31.03.10 2009-10 07.04.10 07.04.10 26.03.10 26.03.10 2009-10 31.03.10 07.07.09 26.06.09 26.06.09 2010-11 07.04.10 07.07.09 26.06.09 26.06.09 2009-10 07.08.09 07.07.09 26.06.09 26.06.09 2009-10 07.04.2009 07.04.09 26.04.09 26.06.08 2009-10 07.07.09 07.07.09 26.06.09 26.06.09 Year of Allowance Date of Actual Payment Due date of Payment Actual Date of Deduction Date on which TDS supposed to be deducted

6. Consequences of Default Liability u/s 201 (1) Penalty – assessee in default u/s 221 equal to the amount of tax in arrears. (1A) Interest @ 1% per month Both the above are consequences of - Not deducting or - Deducted and not paying to the Central Government. (2) After deducting not paying also leads to a charge being credited on the assets of the payer.

7. Consequences of Default Section 276B Fails to pay to the credit of Central Government, tax deducted at source by him as required by or under the provisions of Chapter XVII-B. Imprisonment Period 3 months to 7 years and with fine. Section 271C Penalty for failure to deduct tax at source as required or under the provisions of Chapter XVII-B. Penalty Equal to Tax.

8. Consequences of Default Section 272A(2)(C) FAILURE TO FURNISH THE TDS RETURN – If the deductor fails to furnish the TDS return within due date, he shall be liable for penalty of Rs.100/- per day for the period of default. Section 272A(2)(g) AILURE TO FURNISH A COPY OF CERTIFICATE - If the deductor fails to furnish a certificate to the payee within the prescribed time, he shall be liable for penalty of Rs.100/- per day for the period of default. Section 272BB FAILURE TO APPLY FOR TAN If the deductor fails to apply for TAN within the prescribed time, he shall be liable for penalty of Rs.10000/-.

9. Consequences of Default The person responsible for deducting tax at source will be held as assessee in default and the tax he ought to have deducted at source or he ought to have deposited will be collected from such person.

10. Consequences of Default If the person responsible for deducting or depositing the tax at source, does not pay or deposit the TDS then Interest u/s.201(1A) @ 12% p.a. from the date on which the tax was deductible to the date on which such tax is actually paid will be levied on the amount of such tax.

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