If the taxpayer fails to furnish or file the TDS (Tax Deducted at Source) or TCS (Tax Collected at Source) return within the given time frame, he has to face the consequences of late filing charges under Section 234E. In addition, he is also liable to pay a fine under Section 271H. This post will help you understand Section 234E of the Income Tax Act, 1961, with examples, penalties, and due dates, along with the maximum limit of Late fees under Section 234E.
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What is the meaning of Section 234E of the Income-tax Act?
Section 234E of the Income Tax Act was introduced by the Finance Act of 2012 to cover the late filing of TDS. According to the provisions of 234E, a delay fee or penalty applies for the delay in the delivery of the TDS statement by the payer within the due dates. Late filing charges are to be paid for the delay in filing the quarterly TDS/TCS return to the Income Tax Department. Let’s take a detailed look at Late fees under Section 234E.
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 furnish the TDS or TCS return within the prescribed period.
The circumstances in which section 271H is applicable are:
- If the deductor fails to file the TDS return within the prescribed period,
- When the collector fails to file the TCS within the prescribed time
- If the deductor gives incorrect details at the time of filing TDS,
- When the collector gives inaccurate information while filing TCS
The minimum fine is Rs. 10,000, which can go up to a maximum of Rs. 1,000,000. It should be noted that the penalty under Section 271H will be in addition to the Late fees under Section 234E.
Section 234E Fees Computation
Section 200A of the Income Tax Act, which deals with the processing of TDS, provides for deciding whether the amount is refundable or payable to the deductor, along with the refund process if an excess amount is paid by the deductor. The provisions of Section 200A are amended by the Finance Act of 2015 to enable the calculation of fees payable under Section 234E at the time of processing TDS statements.
Since the TCS statement and TDS statement have similar mechanisms, a new section 206CB was inserted by the Finance Act of 2015, which gives the processing of TCS statements in accordance with the requirements for processing TDS statements under Section 200A of the Ordinance – Taxation Act. At the time of processing the TCS return, new Section 206CB will be in effect, which provides the mechanism for calculating the amount payable under Section 234E of the Income Tax Department.
Penalty for Not Filing TDS or TCS Return
If a person fails to file a TDS or TCS return relating to the deduction or collection of tax at source within the prescribed deadline, he may also be penalized with a fine of not less than Rs 10,000. The fine can go up to Rs. 1 lakh. The taxpayer will be required to pay the penalty along with the late filing fee.
The assessee shall not incur any penalty under this provision if the following conditions are met:
- The taxpayer shall substantiate the delay with a reasonable reason.
- Tax deducted or collected at the source is credited to the government.
- The late filing fee and any interest are credited to the government.
- The TDS/TCS return is filed within one year from the due date.
- Remission or reduction of penalty by the Commissioner of Income Tax
Late fees for delay in filing of TDS/ TCS statement [Section 234E]
Late fees will be payable under Section 234E in the following circumstances:
- The tax deductor fails to submit TDS statements within the prescribed due dates; or
- The tax collector fails to provide TCS statements within the prescribed due dates.
Case law
Biswajit Das v. Union of India (2019): HC upholds the constitutional validity of Section 234E of the Income Tax Act, 1961 (the Act), which imposes a fee for late filing of TDS returns.
Case facts: The judge and advocate challenged the constitutional validity of Section 234E of the Act and also sought cancellation of the fee imposed on him as an assessment by the ministry. The assesses main contention was that the fee under Section 234E of the Act was wrongly and illegally termed a “fee” as it was levied compulsorily and automatically without actually having the nature of a fee within the meaning of the Act.
Held by the Hon’ble Delhi High Court:
- Under Section 234E of the Act, a fee is levied in lieu of any benefit or accommodation provided by the government to a person who has deducted tax on account of another person but has not submitted a tax deduction statement for the delay in filing a TDS return within the period established by law.
- When dealing with the operation and effectiveness of Section 234E of the Act, it is necessary to refer to the provisions of Section 271H of the Act, which waives the imposition of penalty for late submission of a TDS return or statement if the person proves that he has paid the withheld tax and submitted the TDS statement together with the fee and interest before the expiration of a period of one year from the specified time.
- It is further held that the description of the fee under Section 234E as a “fee” does not invalidate the deposit imposed. The provisions of Section 234E of the Act provide the person withholding tax at source an obvious advantage in reducing the deadlines for submitting the statement of tax deducted in this way. The fee imposed under Section 234E of the Act is, for all purposes, a “late fee” payable for receipt of a TDS statement or return at a belated point in time.
- The provisions of Section 234E imposing a fee for the late submission of the statement of tax withheld at source are not ultra vires provisions of the Constitution.
- Accordingly, the petition is dismissed.
Conclusion
The timely payment of TDS or TCS payments under Section 234E of the Income Tax Act is the basic responsibility of every taxpayer. However, it should also be noted that if the deadline for submitting the return fall on a Sunday or public holiday, it can be done the following day. Submit your TDS and TCS statement on time to avoid paying late fees.
