Section 234E of the Income Tax Act, 1961, is a provision that was introduced in 2015 to penalize taxpayers who fail to file their TDS (Tax Deducted at Source) returns or submit them after the due date. The section aims to ensure timely filing of TDS returns by imposing a penalty on taxpayers who fail to comply with the provisions of the Income Tax Act.
What is Section 234E of the Income Tax Act?
Section 234E of the Income Tax Act, 1961, imposes a penalty of Rs. 200 per day on taxpayers who fail to file their TDS returns or submit them after the due date. The penalty is calculated from the day after the due date until the day the return is filed. The total amount of penalty cannot exceed the total amount of TDS deducted for the relevant period.
Who is liable to pay the penalty under Section 234E?
Any taxpayer who deducts TDS or collects TCS (Tax Collected at Source) is liable to file a TDS/TCS return. If the taxpayer fails to file the return within the due date, the penalty under Section 234E is levied.
How is the penalty calculated under Section 234E?
The penalty under Section 234E is calculated at the rate of Rs. 200 per day for the period of delay. The calculation of penalty starts from the day after the due date and ends on the day the return is filed. The maximum penalty that can be levied is limited to the amount of TDS deducted for the relevant period.
For example, if a taxpayer deducts TDS of Rs. 50,000 and fails to file the TDS return within the due date, the penalty under Section 234E will be calculated as follows:
Number of days of delay = 30 days Penalty for delay = 30 x Rs. 200 = Rs. 6,000 Maximum penalty = Rs. 50,000 Therefore, the penalty under Section 234E in this case will be Rs. 6,000.
How to avoid penalty under Section 234E?
To avoid penalty under Section 234E, taxpayers must ensure that they file their TDS returns within the due date. They must also ensure that the returns are accurate and complete in all respects.
In addition to the penalty under Section 234E, taxpayers who fail to file their TDS returns or submit them after the due date may also be liable to pay interest under Section 220(2) of the Income Tax Act. The interest is calculated at the rate of 1% per month or part of a month on the amount of tax payable.
It is important to note that the penalty under Section 234E is in addition to the interest payable under Section 220(2). Therefore, taxpayers who fail to file their TDS returns or submit them after the due date may end up paying a substantial amount of penalty and interest.
To avoid such penalties and interest, taxpayers must ensure that they file their TDS returns within the due date. The due date for filing TDS returns is different for different types of taxpayers and may vary depending on the quarter or the financial year.
Taxpayers must also ensure that they provide accurate and complete information in the TDS returns. Inaccurate or incomplete information may lead to scrutiny by the Income Tax Department, which can result in further penalties and interest.
Conclusion
Section 234E of the Income Tax Act, 1961, is an important provision that aims to ensure timely filing of TDS returns by taxpayers. The penalty under this section acts as a deterrent for taxpayers who fail to comply with the provisions of the Income Tax Act. To avoid the penalty, taxpayers must ensure that they file their TDS returns within the due date and provide accurate and complete information in the returns.
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Frequently Asked Questions (FAQs)
What is Section 234E of the Income Tax Act?
Section 234E is a provision in the Income Tax Act that imposes a penalty on taxpayers who fail to file their TDS returns or submit them after the due date.
Who is liable to pay the penalty under Section 234E?
Any taxpayer who deducts TDS or collects TCS is liable to file a TDS/TCS return. If the taxpayer fails to file the return within the due date, the penalty under Section 234E is levied.
What is the amount of penalty under Section 234E?
The penalty under Section 234E is Rs. 200 per day for the period of delay. The maximum penalty that can be levied is limited to the amount of TDS deducted for the relevant period.
Is the penalty under Section 234E applicable for TCS returns?
No, the penalty under Section 234E is applicable only for TDS returns and not for TCS returns.
Can the penalty under Section 234E be waived?
The Income Tax Department has the power to waive the penalty under Section 234E if it is satisfied that the delay in filing the TDS return was due to a reasonable cause.
Can the penalty under Section 234E be reduced?
No, the penalty under Section 234E cannot be reduced or waived by the Income Tax Appellate Tribunal.
How can I avoid penalty under Section 234E?
To avoid penalty under Section 234E, taxpayers must ensure that they file their TDS returns within the due date and provide accurate and complete information in the returns.
When is the due date for filing TDS returns?
The due date for filing TDS returns varies for different types of taxpayers and may vary depending on the quarter or the financial year.
Can I file a belated TDS return?
Yes, taxpayers can file a belated TDS return. However, they will be liable to pay a penalty under Section 234E.
What is the rate of interest payable under Section 220(2)?
The rate of interest payable under Section 220(2) is 1% per month or part of a month on the amount of tax payable.
