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The new section 234E is inserted by the Income Tax Department where a person fails to file the TDS/TCS return on or before the prescribed due dates as per Income Tax Act. Read this guide by H&R Block India to know more about penalties under section 234E.

Penalties For Delay in Submission of TDS Returns under section 234E

Last Update Date : May 09, 2018

section 234e

We all are familiar with terms like penalty, late payment charges etc., in our daily lives when it comes to bills, or any outstanding payments that are pending.

Similarly, when it comes to income tax, the penalty or late payment charges are levied by the Income Tax Department(ITD) to an individual who has not complied with the requirements of law or unable to meet his/her tax obligations. So, when the taxes are not paid on time the penalties will get applied along with interest.

Along with individual tax payers, the same rule of paying taxes and submitting of relevant tax documents applies to the Deductor or companies/employers who deduct the TDS (Tax Deducted at Source) from the income of their employees. Learn more about the penalties under section 234E  and how it applies to employers as per Income Tax Act.

What is Section 234E of Income Tax Act

Section 234E of Income Tax Act deals with the late payment fees/penalty applicable for delay in submission of TDS returns by the Deductor as per the due dates. The late filing fee should be paid towards the delay in submission of quarterly TDS/TCS return to the ITD. Section 234E was brought into force on 1st July 2012.

TDS / TCS Deduction Process – Duties of Deductor/Collector

Below are the few basic duties of a person who is liable to deduct or collect TDS

  • Deductor will have to quote the Tax Deduction Account Number (TAN) or the Tax Collection Account Number (Tax Collected at Source(TCS)) as per the requirement on all the relevant documents
  • The Deductor is supposed to submit/file the periodic TDS/TCS returns
  • Deductor has to deduct or collect the relevant tax applicable as per the tax rate and submit the payments to the ITD
  • The Deductor issues TDS/TCS certificate against the tax deducted/collected by him/her

Due Dates for filing TDS/TCS Return

The due dates of filing the TDS/TCS return for different quarters of FY 2017-18 is shown as below:

Quarter ending Due date for filing of TDS return (Government and other Deductor) Due date for TCS return filing
30th June 2017 31st July 2017 15th July 2017
30th September 2017 31st October 2017 15th October 2017
31st December 2017 31st January 2018 15th January 2018
31st March 2018 15th May 2018 15th May 2018

An individual is expected to file the TDS/TCS return as per the due dates prescribed or become liable to pay the late filing fees as provided u/s 234E. In addition to the late filing fees, a penalty is also levied under Section 271H.

As per Section 234E, a late fee of Rs. 200 per day is applicable to be paid to the Income Tax Department towards the late filing of TDS/TCS return. That means the fine will be levied for everyday of delay until the fine amount is equal to the amount of TDS and not more. The late fee should be deposited before filing the TDS/TCS return. Let’s take an example to understand this better.

for Example: The TDS amount of Rs. 5000 was supposed to be paid by 13th May and its paid-on 17th November. There is a delay of 189 days and so its 189 X 200 = Rs. 37,800.

But as this amount is more than Rs 5000, only Rs. 5000 is levied as late filing fees along with Interest as per Section 271H.

In case a person fails to file the TDS/TCS return as per the due dates, the Assessing Officer will direct that person to pay penalty under section 271H in addition to the late fee applicable as per section 234E.

The penalty can be levied from Rs. 10,000 and can be up to Rs. 1 lakh under section 271H in case the Deductor/Collector files an incorrect return.

Below are the exceptions to the section 271H where no penalty is levied for delayed filing of TDS/TCS return after these conditions are satisfied:

  • The TDS/TCS is paid to the Government
  • Late filing fee along with Interest in case any is paid to the Government
  • The TDS/TCS return is filed before the expiry of one year from the due date as specified where the return submitted is correct and shouldn’t be an incorrect return

Section 234E Fees Computation

Section 200A of the Income-tax Act deals with the processing of TDS, for determining whether the amount is payable or refundable to the Deductor along with the refund process, if there is an excess amount paid by the Deductor. These Provisions of Section 200A are amended by the Finance Act, 2015 to enable the fee computation payable section/s 234E at the time of processing of TDS statements.

As the TCS statement and TDS statement mechanism is similar, a new section 206CB has been inserted by Finance Act, 2015 to provide for processing of TCS statements in line with the provisions for processing of TDS statement as per section 200A of the Income-Tax Act. At the time of processing the TCS statement, the new section 206CB also provides for mechanism for computation of fee payable under section 234E to the Income Tax Department.

By now through this guide, we have understood what is section 234E, Due Dates to file the TDS/TCS return and Section 271H as per Income Tax Act. Introduction of these sections is an encouraging move by the Government to avoid the inconveniences faced by the tax payers as well as the Deductor/Collectors.

This helps improve the filing compliance and avoiding subsequent delays in availability of tax credits in the tax payers Form 26AS . For any further assistance and to avoid delays in submitting your returns, enlist the aid of the tax experts at H&R Block, India.

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