Paying house rent of Rs 50000 or more per month? Penalty you will pay for not deducting TDS
tax deducted at source (TDS) while paying house rent, payments to contractors, etc., if the amount exceeds the specified limit. The tax must be deducted within the specified timelines under the Income Tax Act, 1961. Further, the tax deducted must be deposited with the government within the given time frame. If one or both of these were not done by an individual (liable to deduct TDS), then he/she will have to pay a penalty.
Apart from deducting and depositing TDS, an individual must also file a TDS return. Failure to do that will result in a penalty as well.
Hence, an individual will be liable to pay three types of penalties if:
- TDS is not deducted within a specified time.
- TDS is deducted but not deposited within the prescribed time period.
- TDS return is not filed on time.
What is the penalty for not deducting TDS when mandatory?
«Where any individual fails to deduct TDS, he/she is liable to pay penal interest on the TDS amount. The penal interest is levied under section 201(1A) at 1% per month. It is applicable from the date when TDS should have been deducted till the date when it is deducted,» says Chintan Ghelani, Associate Partner, Direct Tax, N.A. Shah Associates, a Mumbai-based chartered accountancy firm.
For example: Mr. Jaspreet was supposed to deduct TDS @5% before paying rent of Rs 51,000. TDS amount comes to Rs 2,550. But Mr. Jaspreet failed to deduct the TDS for two months. Hence, he is liable to pay Rs 2,550 plus 1% penal interest for one month i.e., Rs 2575.5 (Rs 2,550+25.5)
What is the penalty for not depositing the deducted TDS?
The penalty for not depositingTDS with the government despite deducting it is different from the penalty for not deducting. «Where any individual fails to deposit the
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