Jun 87 min read

Section 234E: A Detailed Overview for Taxpayers

Tax deductors are subject to late filing costs under Section 234E if they do not file or submit their TDS (Tax Deducted at Source) or TCS (Tax Collected at Source) statement within the allotted time limit. In addition, under Section 271H, he or she is also required to pay a penalty. This article clarifies Section 234E of the Income Tax Act, 1961 by providing instances, penalty information, due dates, and the highest amount of late fines that may be assessed.

What is Section 234E of the Income Tax Act?

TDS Return Filing Due Dates

Penalty for Not Filing TDS/TCS Returns

Penalty for Late Filing of TDS/TCS Returns

Calculation of Fee under Section 234E

How to Avoid Penalty under Section 234E?

Additional Points to Consider

Conclusion

Most Asked Questions

What is Section 234E of the Income Tax Act?

Under Section 234E of the Income Tax Act, 1961, taxpayers who fail to file their TDS returns or file them after the deadline would be penalised Rs. 200 per day. From the day after the deadline until the day the return is filed, the penalty is computed. The entire amount of TDS withheld for the applicable period cannot be greater than the total amount of penalties. A TDS/TCS return must be filed by each taxpayer who collects or deducts TCS (Tax Collected at Source). The penalty under Section 234E is assessed if the taxpayer neglects to file the return by the deadline.

TDS Return Filing Due Dates

Penalty for Not Filing TDS/TCS Returns

In addition to Section 234E of the Income Tax Act, if the responsible party does not produce the TDS or TCS return within the allotted time, Section 271H levies a penalty on the collector or deductor. Section 271H is applicable in the following situations:

If the deductor neglects to submit a TDS return by the deadline
When the deductor submits false information when submitting TDS
When the collector submits false information when filing TCS
When the collector neglects to file TCS within the allotted period

Penalties start at Rs. 10,000 and can go up to Rs. 1,000,000 in total. Note that the late filing fees under Section 234E will be in addition to the penalty under Section 271H.

Penalty for Late Filing of TDS/TCS Returns

A late fee of Rs. 200 per day is imposed, as per Section 234E, to be paid to the Income Tax Department (ITD) for late submission of TDS/TCS returns. This implies that a fee will be assessed for each day of lateness until the total fine is equal to the TDS, but not more. It is necessary to deposit the late charge before submitting the TDS/TCS return.

Calculation of Fee under Section 234E

For the duration of the delay, the penalty under Section 234E is computed at the rate of Rs. 200 per day. Penalty calculations begin the day following the due date and conclude the day the return is filed. The amount of TDS withheld for the applicable period sets the maximum penalty that can be assessed.

Illustration:

On January 12, 2021, A files a quarterly statement of TDS or the TDS return for the first quarter of 2021–2022. The total amount of tax withheld at source for the entire quarter was Rs. 34,000. The first quarter's TDS return must be submitted by July 31, 2021, at the latest. In other words, how much, including late filing fees, must A pay? The difference between the date the TDS statement was filed and the designated date is

Number of days delayed= 152

If 200 rupees are charged per day under Section 234E, the total late filing fee will be 152 x 200 = Rs. 30,400. He will therefore be responsible for paying an Rs. 30,400 late fee.

How to Avoid Penalty under Section 234E?

Taxpayers must make sure they file their TDS returns by the deadline in order to avoid being penalised under Section 234E. They also have to make sure that the refunds are whole and precise. Taxpayers who neglect to file their TDS returns or submit them after the deadline may additionally be subject to interest under Section 220(2) of the Income Tax Act, in addition to the penalty under Section 234E. The interest is computed on the amount of tax payable at a rate of one percent every month or a fraction of a month.

In addition to the interest due under Section 220(2), there is also a penalty under Section 234E. Consequently, taxpayers risk incurring a substantial penalty and interest if they neglect to file their TDS forms or do so after the deadline. Taxpayers need to make sure that they file their TDS returns by the deadline to avoid these fines and interest. Depending on the fiscal year or the quarter, different taxpayer categories have varying deadlines for filing TDS returns. It is also the taxpayer's responsibility to make sure that the TDS returns contain accurate and comprehensive information. The Income Tax Department may investigate inaccurate or incomplete information, which could result in additional fines and interest.

Additional Points to Consider

Here are a few more points taxpayers must consider when it comes to Section 234E of the Income Tax Act:

Certificates for TDS and TCS: Within the allotted time frame, the TDS and TCS certifications must be given to the collector or the deductee. The deductor or collector shall be responsible for paying a fee of Rs. 100/-per day till the certificate is issued if there is a delay in granting it.
Rectification of TDS and TCS statements: A taxpayer may file a correction statement to address any inaccuracies in the TDS or TCS statement. To avoid any penalties or interest, the corrected statement must be filed within the allotted period.
Revised TDS and TCS statements: Taxpayers are required to make sure that any changed TDS or TCS statements are filed within the allotted time frame. Section 234E may impose a late filing charge for failure to comply.
Fee waiver: The Central Board of Direct Taxes (CBDT) can eliminate or lower the fee assessed in accordance with Section 234E. However, the waiver or decrease can only be applied case-by-case, with the decision based on particular facts and circumstances.
Digital signature: Taxpayers can use a digital signature to electronically file their TDS and TCS statements. Using a digital signature lowers the possibility of mistakes and guarantees the statement's legitimacy.
Section 234E for Non-Resident Taxpayers: Non-resident taxpayers who are obliged to collect or deduct TDS or TCS in India are likewise covered by Section 234E. The amount of TDS or TCS for which the statement was to be provided, however, cannot be more than the fee assessed under this section.

Conclusion

One significant clause in the Income Tax Act of 1961 is Section 234E, which attempts to guarantee that taxpayers file their TDS returns on time. For taxpayers who violate the Income Tax Act, the penalty under this clause serves as a disincentive. Taxpayers must make sure they file their TDS forms by the deadline and include all necessary information to avoid being penalised.

FAQ

Q1. Is there any penalty for not filing TDS/TCS statements?

Yes, under Section 271C of the Income Tax Act, there is a penalty for failing to file TDS or TCS statements. The penalty may equal the amount of TDS or TCS that was supposed to be deducted or collected.

Q2. How much is the late filing fee under Section 234E of the Income Tax Act?

Under Section 234E, there is a daily late filing fine of Rs. 200 till the default persists. The charge, however, is limited to the total TDS or TCS for which the statement was needed to be provided.

Q3. Can the late filing fee under Section 234E be waived or reduced?

Depending on the specific facts and circumstances of each instance, the Central Board of Direct Taxes (CBDT) may waive or lower the late filing cost under Section 234E.

Q4. Is Section 234E applicable to non-residents?

Yes, non-residents who must deduct or collect TDS or TCS in India are subject to Section 234E. The late filing fee, however, cannot be greater than the total TDS or TCS for which the statement was needed to be submitted.

Q5. Can a taxpayer file a revised TDS/TCS statement?

If a taxpayer finds problems in their initial TDS or TCS statement, they are able to file a revised version of the statement. To prevent any penalties or interest, the amended statement must be submitted within the allotted period.

Q6. What is the consequence of the non-issuance of a TDS/TCS certificate?

A late filing fee of Rs. 100 per day, until the certificate is issued, may be imposed for failure to issue a TDS or TCS certificate.

Q7. When is the due date for filing TDS returns?

Depending on the financial year or the quarter, different taxpayer classes have varying deadlines for filing TDS returns.

Q8. Can a taxpayer file TDS/TCS statements electronically?

To guarantee authenticity and minimise errors, taxpayers may electronically file TDS or TCS statements using a digital signature.

Q9. Can I file a belated TDS return?

Taxpayers can submit a delayed TDS return, yes. Nonetheless, they will have to pay a fine under Section 234E.

Q10. What is the interest rate payable under Section 220(2)?

Under Section 220(2), interest on the amount of tax due is payable at the rate of one percent (1%), either monthly or in part each month.

Q11. What are the latest updates regarding Section 234E of the Income Tax Act?

Stay informed about any recent amendments, notifications, or changes pertaining to Section 234E of the Income Tax Act, ensuring compliance with the most current regulations.

Q12. How does Section 234E impact small businesses and startups filing TDS returns?

Explore the nuanced implications of Section 234E on small businesses and startups, including challenges, exemptions, and strategies for managing TDS return filings effectively.

Q13. What are the repercussions of Section 234E for freelancers and gig economy workers?

Understand the unique challenges faced by freelancers and gig economy workers regarding TDS return filings under Section 234E, and explore tailored solutions to mitigate penalties.

Q14. Can automated software assist in compliance with Section 234E for TDS return filings?

Discover how automation tools and software solutions can streamline the process of complying with Section 234E requirements for TDS return filings, optimizing efficiency and accuracy.

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