What is Section 234E of Income Tax Act: Penalty for Late Payment of TDS and TCS
If tax deductor fails to submit or file TDS (Tax Deducted at Source) or TCS (Tax Collected at Source) statement in the given time frame, they have to face consequences of late filing fees under Section 234E. Apart from that, he/she is also liable to pay a penalty under Section 271H.
This post helps you understand Section 234E of the Income Tax Act, 1961 with examples, penalty and due dates along with the maximum limit of late fees that can be charged under Section 234E. Read on!
What is Section 234E Of the Income Tax Act?
Under Section 234E, the tax collector and tax deductor must present the quarterly statements as per the Income Tax Act to the IT Department.
If one fails to do so, late fees of two hundred rupees per day will be affixed to the amount until the day such failure continues.
Example:
A quarterly statement of TDS or the TDS return for the first quarter of 2021-2022 is filed by Mr. Roy on 01.12.2021. Tax deducted at source throughout the quarter stood at Rs. 34,000.
Last date for filing the TDS return for the first quarter was July 31 2021. So how much does Mr. Roy have to pay, including the late filing fees?
The gap between the date of filing TDS statement and the date specified is:
| Months | No. of Days |
| August | 30 |
| September | 30 |
| October | 31 |
| November | 30 |
| December | 31 |
| Total no. of days delayed | 152 |
According to Section 234E, if 200 rupees per day is levied, the total amount of late filing fees stands at 152X200= Rs. 30,400.
So, he will be liable to pay a late fee of Rs. 30,400.
What are TDS and TCS?
Before discussing any further about Section 234E, you need to have a clear idea about TDS and TCS separately. TDS and TCS are both important sources of revenue for the government.
TDS means Tax Deducted at Source. According to Section 194Q, the Income Tax Department made it compulsory for any individual or company to subtract TDS if payment for goods and services exceeds Rs. 50 lakhs.
The government decides the TDS rates. An individual or a company deducting TDS from the payment made is called the deductor; the person or company receiving this payment is called the deductee.
TCS stands for tax collected at source. TCS is imposed on goods by the seller who collects them from the buyer at the time of sale. Section 206C mentions the goods and services on which TCS is applicable. TCS is applicable for transactions beyond Rs. 50 lakh.
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Penalty for Not Filing TDS and TCS Returns
Along with Section 234E of the Income Tax Act, Section 271H imposes a penalty on the collector or deductor if the responsible person fails to provide the TDS or TCS return within the specified time.
The circumstances under which Section 271H is applicable are:
- If the deductor fails to file a TDS return within the given time
- When the collector fails to file TCS within the prescribed time
- If the deductor provides incorrect information at the time of filing TDS
- When the collector provides inaccurate information while filing TCS
Minimum penalty amount is Rs. 10,000 which can go up to a maximum of Rs. 1,00,000.
It should be noted that the penalty as per Section 271H will be in addition to the late filing fees as per Section 234E.
Due Dates of TDS Return Filing
Due dates for filing TDS and TCS returns for AY 2022-23 are as given below.
TDS due dates:
| Quarter | Duration | Last Due Date |
| 1st quarter | 1st April- 30th June | 31st July 2022 |
| 2nd quarter | 1st July-30th September | 31st October 2022 |
| 3rd quarter | 1st October-31st December | 31st January 2022 |
| 4th quarter | 1st January-31st March | 31st May 2022 |
Section 234E Fees Computation
The amount payable or refundable to the deductor after the submission of the TDS statement is done under provisions of Section 200A of the Income Tax. It has been amended by the Finance Act 2015 to facilitate computation of TDS under Section 234E of income tax, India during the processing of TDS statement.
A new Section 206CB was inserted through the Finance Act 2015 for TCS statement process. The new section is also enabled for computation of fees that is to be paid under Section 234E.
Amount of Late Fees under Section 234E
The late filing fees have been fixed at Rs. 200 per day, continued till the date of failure persists. It should also be noted that one cannot file for a TDS return without payment of late filing fees.
Maximum Limit of the Late Fee Amount under Section 234E
Maximum amount of the payable late filing fees should not exceed the amount of TCS or TDS, as per Section 234E(2).
Final Word
Timely payment of TDS or TCS payments under Section 234E Of Income Tax is an essential responsibility of every tax deductor. However, one should also be aware of the fact that if due dates for filing returns fall on Sundays or public holidays, one can do so the next day. Submit your TDS and TCS statement on time and avoid paying late fees.
FAQs
Ans. Different types of TDs forms are Form 24Q, Form 26Q, Form 27Q, and Form 27EQ. TDS forms are dependent on the type of deductees and their income.
Ans. Any person making these types of payments is required to deduct taxes at the source:
• Salary payment
• Insurance commission
• Income from winning horseraces
• Gain by winning lotteries
• Income on securities
• Payment on the National Saving Scheme and others.
Ans. TDS return filing is a quarterly statement that should be given to the Income Tax Department. TDS returns can be filed completely online, and once submitted, given details will come up on Form 26AS.
Ans. Here are the details to be mentioned while filing TDS return:
• PAN of both the deductee and the deductor
• TDS challan details
• Amount of tax paid
Others, if any.
Ans. TAN stands for Tax Deduction and Collection Number. This is a 10 digit number obtained by those responsible for collecting TDS or TCS from concerned sources.
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