written by Khatabook | June 9, 2021

Time Limit To Deposit TDS And File TDS Return

What Is TDS?

Tax deducted at source is a system made by the government to keep track of people earning income. It helps to check if they are paying their taxes and filing the returns as per the Income Tax laws. It is very important to know that Income tax is a self-declaration tax. It means that a person earning income has to declare the income earned to the government by filing a ‘Return’ and pay tax accordingly. 

TDS makes it compulsory for the persons making a payment to deduct tax before making the payment. That means the payer deducts TDS from the income you earn and pays you the balance amount. There are various threshold limits for when an assessee must deduct TDS under the Income Tax Law. It also provides the rates of  TDS deduction.

Before we proceed it will be useful to understand the following terms:

  • TDS Deduction: The payer deducts the TDS amount from the total amount payable to the payee. The payee receives only the balance amount.
  • TDS Deposit: The deductor makes a challan and pays or transfers the TDS amount deducted to the government.  
  • TDS Return: TDS Return is a summary of information filed by the deductor with the Government. It contains data related to the total amount payable, the total amount deducted, the PAN of deductee, date of payment, type of Income, any Interest or penalty payable, etc.

Also Read: What is Tax Deducted at Source, Deduction Rules & Payment Method

Time Limit To Deposit TDS and file TDS Returns

  • Once the payer deducts TDS from the payable amount, this tax deducted at source, the payer must deposit it to the government’s account at the earliest. The payer merely acts as an agent of Government for the TDS he deducts and holds until deposit. This amount is not his income and is payable to the Government within the time limit. 
  • Now the question arises, why is there a time limit prescribed? Should you pay the TDS deducted to the Government immediately after every deduction? Whether you should deposit all deductions in lump-sum or as and when you deduct them?

Let us consider an example, a company doing a resale trade of Garments.

  • This company has many payments to make. From the employees working in the company, to the suppliers from whom the company purchases materials, to the shareholders of the Company, etc. This list can go long
  • The company makes these payments regularly as they form part of the business. But it may become difficult for the Company to deduct TDS for each payment and deposit it to the government annually. 
  • Hence the Income Tax Law specifies time limits to make sure that you avoid such difficulties. The Company can make TDS deposits monthly and smoothly file TDS returns quarterly.

Time Limit to Deposit Tax Deducted at Source

Before understanding when to deposit TDS, let us understand when to deduct TDS.

You should deduct TDS:

  1. At the time of Payment,
  2. Or at the time of crediting the account of the payee, whichever is earlier.

Except for the following, you should deduct TDS only at the time of payments:

  1. Salary
  2. EPF Payment
  3. Winnings from Lottery
  4. Maturity of Life Insurance Policy
  5. Compensation on compulsory acquisition of property
  • If you make the first payment to the payee,  and raise the invoice, or credit the account in the books of the company, then you must deduct TDS on the date of payment itself. Such deduction is TDS deducted on the date of payment.
  • If the payer credits the payee’s account before making the payment to the payee, the payer must deduct TDS on the payment date. However, the payer can consider it as deducted when they credit the payee’s account in the books of the payer. You need this separation to know when a particular amount falls due to deposit it with the Government.

You must be wondering why is this so?

According to the Income Tax Act 1961, the payer must deposit tax deducted at source before or by the 7th day of the next month.

Also Read: TDS On Salary Under Section 192

Let us summarize the same through the chart below:

Sr. No.

Month of TDS Deduction

(considered for deduction)

Due Date of TDS deposit with Challan

1

April 

7th May 

2

May

7th June

3

June

7th July

4

July

7th August

5

August

7th September

6

September

7th October

7

October

7th November

8

November

7th December

9

December

7th January

10

January

7th February

11

February

7th March

12

March

30th April #

The due date for the TDS deposit for March is 30th April of next Financial year. However, the due date for a Government Office is 7th March. If a Government Office deposits TDS without Challan, then the due date for such deposit is the same day as TDS deduction.

Also Read: TDS Challan ITNS 281- Pay TDS Online With E- Payment Tax

Due Dates to File TDS Returns

TDS Returns are summary statements of the TDS deducted and deposited to the Government.

Your TDS returns show the following details of tax deducted at source:

  1. PAN of the Deductee
  2. PAN and TAN of the deductor
  3. The amount payable to the deductee before TDS (amount on which you deduct TDS)
  4. Amount paid to the Deductee after TDS
  5. TDS payment challan details
  6. Type of payment made to the deductee

Sr. No.

Quarter period

TDS Return Due date

TDS Return Due Dates as per Ordinance 2020

1

1st April to 30th June

31st July 

31st March 2021

2

1st July to 30th September

31st October

31st March 2021

3

1st October to 31st December

31st January

31st Jan 2022

4

1st January to 31st March

31st May

31st May 2022 for FY ending 31st Mar 2021.

31st July 2020 for FY ending 31st Mar 2020. 


Penalties Under Tax Deducted at Source

As already mentioned, the Payer must deduct TDS at the rates specified and deposit it with the Income Tax Department on the due dates mentioned above. However, if there is a failure in this regard, then penalties apply on such a payer in the following ways:

  1. Late fee 

    • Under section 234E of the Income-tax Act, 1961, a late fee is payable for not furnishing the TDS Returns within the due date specified. The late fee charge is Rs 200 per day for every day during which the failure continues. But the amount of late fee cannot exceed the amount of TDS in default.
  2. Interest

    • As section 201A,  the government charges interest for non-deduction or non-deposit of TDS with the Income Tax Department.
    • Interest at a rate of 1% per month or part thereof is charged on the amount of TDS from the date the tax was deductible until the payment date.
    • Also, interest at a rate of 1.5% per month or part of a month applies on the amount of TDS  where the payer has not deposited TDS. It applies from the date on which the payer deducted tax till the date on which the payer deposits it to the Government. However, for the due dates falling between 20th March 2020 and 29th June 2020, Interest at a rate of 0.75% applies for non-deposit of TDS.
  3. Penalty

    • If TDS is not filed within a year of the due date the assessing officer will charge a minimum of Rs 10,000 which may extend to Rs 1,00,000.

Let us consider various situations below to understand the concepts well.

1. Mr. A makes a payment of Rs. 5,00,000 to Mr. B for contractual payment on 28th January 2020 and credits his account on 21st January 2020

  • Here, Mr. A is the Deductor/Payer, and Mr. B is the Deductee/ Payee. 
  • 21st January is the date of TDS deduction as this date comes before the date of payment.
  • Hence, the due date to Deposit TDS by Mr. A is 7th February 2020.
  • The due date to file TDS Return by Mr. A for this quarter is 31st July 2020 (as per Ordinance 2020)
  • Amount of TDS deduction is Rs. 5,000 [500,000 * 1% (as per section 194C)] 
  • Amount paid to Mr. B is Rs. 495,000 (500,000 – 5,000)

2. In continuation with the above example, consider that Mr. A fails to deduct TDS and deposit the same within the due date. He only realizes his mistake after the due date and deducts the amount on 20th February 2020 and deposits it on 15th March 2020. He also files the return for March 2020 on 20th August 2020.

  • Here, both Interest and late fees get attracted as below.
  • Interest for the months January and February 2020 at a rate of 1% for non-deduction of TDS will amount to Rs.8.33/- (5,000* 1% * 2/12).
  • Interest for non-deposit of TDS for January 2020, February 2020, and March 2020 at a rate of 1.5% for non-deposit of TDS will amount to Rs. 18.75/- (5,000*1.5%*3/12)
  • Late fees under section 234E for late filing of TDS Return will amount to Rs. 4000/- (20 days * Rs. 200 per day). If, however, this amount exceeded 5,000/- in any case, the maximum amount will still be Rs 5,000.

Also Read: Income tax Calculator

Conclusion

 The income tax laws require you to deduct TDS at the given rates. It is also equally important to make sure you pay them to the government and file your returns in time. If you don't follow the laws and rules related to tax deducted at source, you will have to pay interest, late and penalty. So make sure you pay your taxes and file your return on time. 
 

FAQs

When is the section 271H penalty for tax deducted at source not charged?

If you deposit the TDS along with interest and late fees before the expiry of 1 year from the due date of filing the TDS Return, section 271H penalty will not apply

How do I consider the number of days of delay while calculating the TDS penalties?

You have to consider the number of months or part of a month after the due date, while calculating the delay. You don't have to consider the number of days.

What if the late fee exceeds the TDS amount?

The late fee under section 234E cannot exceed the TDS amount in total. If it exceeds while calculating, you need to pay only up to the TDS amount.

On which amount do I calculate the penalty? 

You should calculate penalties on the TDS amount deducted.

Is the late fee payable on a NIL TDS return?

The payer must file a NIL TDS return when they make payments that are not liable for TDS deduction. For such Nil TDS Returns, no late fee is chargeable.

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