Penalties, Prosecution & Interest Calculation on Late filing of TDS Return for Asstt. Year 2014-15.

The various provisions of TDS as discussed in the preceding chapters are statutorily required to be strictly complied with. Any default in compliance can attract, levy of interest, penalty and in certain cases initiation of prosecution proceedings. In this chapter a brief discussion of the possible defaults and the consequential proceedings is being done.

Failure to deduct tax - Where the employer has failed to deduct tax or when short deduction of tax has been done, following statutory provisions are attracted:-

Charging of interest u/s 201(1A) - The deductor is treated to be ‘assessee in default’ in respect of the short deduction/non deduction of tax. Under Section 201(1A) he is liable to pay simple interest @ 1% for every month or part of a month on the amount of tax in arrear from the date on which such tax was deductible to the date on which such tax is actually deducted. Further such interest shall be paid before furnishing the quarterly statement of each quarter.  Charging of interest u/s 201(1A) is mandatory and there is no provision for its waiver. 

Procedure for interest calculation : The calculation of interest is to be done as per Rule 119A and is summarized below:

  • Where the interest is to be calculated for every month or part of a month comprised in a period, any fraction of a month shall be deemed to be full month and interest shall be so calculated.
  • The amount of tax in respect of which interest is to be calculated is to be rounded off to nearest multiple of Rs. 100 ignoring any fraction of Rs. 100.

Penalty u/s 221- The assessee in default is liable to imposition of penalty where the assessing officer is satisfied that the defaulter has failed to deduct tax as required without good and sufficient reason. The quantum of penalty is not to exceed the amount of tax in arrear. Besides, a reasonable opportunity of being heard is to be given to the assessee.

Penalty u/s 271C- A penalty equivalent to the amount of tax the deductor has failed to deduct, is leviable u/s 271C. Such penalty is however only leviable by a Joint Commissioner of Income Tax.

Failure to deposit tax in govt. account after deduction: Where the employee has deducted the tax at source but failed to deposit wholly or partly, the tax so deducted in government account, the following statutory provisions are attracted:-

  • Interest u/s 201(1A)- The deductor is treated as an assessee in default and interest u/s 201(1A) is leviable @1.5% for every month or part of the nonth on the amount of such tax from the date on which such tax was deducted to the date on which such tax is actually paid. Further, the tax along with the simple interest u/s 201(1A) becomes a charge upon all the assets of the deductor.
  • Penalty u/s 221- Penalty to the extent of tax not deposited is leviable by the A.O. as discussed earlier.
  • Prosecution proceedings u/s 276 B- Where the deductor has failed to deposit tax deducted at source, in govt. a/c without a reasonable cause then he is punishable with rigorous imprisonment for a term which shall not be less than 3 months but which may extend to 7 years and with fine.

Failure to apply for T.A.N or to quote T.A.N. Where a person who is responsible to deduct tax at source has failed, without reasonable cause:-

  • To apply for T.A.N. within prescribed period or 
  • After allotment, failed to quote such TAN in challans for payment of tax or TDS certificate or returns of TDS (as required u/s 206) - then a penalty u/s 272BB of a sum of Rs.10,000 may be imposed by the assessing officer. However a reasonable opportunity of hearing must be given to the employer/deductor.

Failure to furnish TDS certificate or returns/statement of tax deduction at source- (penalty u/s. 272A(2)) Where the employer has failed to issue TDS certificate (form 16) within one month of the end of financial year (by 31st of May of the next F.Y. for F.Y. 2010-11 onwards) or has failed to furnish the quarterly statement of tax in form 24Q, within the time prescribed u/s 200(3) (rule 31A), then a penalty of Rs. 100 is leviable for each day during the period for which default continues. The quantum of penalty is not to exceed the tax deductible and it is to be levied only by a Joint Commissioner or Joint D.I.T. after giving the assessee an opportunity of being heard.

Prosecution u/s 277- Where a person, who is required to furnish statement u/s 200(3) (quarterly statements) makes a false statement in verification or, delivers an account or statement which is false and which the person knows or believes to be false or does not believe to be true, then he is punishable with rigorous imprisonment for a term which shall not be less than 3 months but which may extend to 7 years along with fine. Where the amount of tax, which would have been evaded if the statement or account had been accepted as true, is 1 lakh rupees or less, then rigorous imprisonment may be from 3 months to three years and with fine.

The Finance Act, 2008 has introduced amendment in section 201 (w.e.f. 1.6.2002) which clarifies, that in case any employer, or any principal officer of a company;

  • does not deduct,or
  • does not pay,
  • or after so deducting fails to pay the whole or any part of the tax, then such person shall be deemed to be an assessee in default. Further penalty to be charged u/s. 221 shall not be levied by the assessing officer unless he is satisfied that such failure to deduct and pay tax was without good and sufficient reasons.

New Post Office Rule - Time Deposit Account be renewed Automatically on Maturity.

The Post office Department has been issued a notification No. GSR222(E) [F.NO.2/7/2012/NS-II], DATED 13-3-2014 with new amendment as amendment in Rule 6 regarding automatically renewal of Time Deposit Account which is in a CBS Branch of Post Office.  The detailed notification is as under


NOTIFICATION NO. GSR 222(E) [F.NO.2/7/2012/NS-II], DATED 13-3-2014

In exercise of the powers conferral by Section 15 of the Government Savings Bank Act, 1873 (5 of 1873), the Central Government hereby makes the following rules further to amend the Post Office Time Deposit Rules, 1981, namely:—
1. (1) These rules may be called the Post Office Time Deposit (Amendment) Rules, 2014.
   (2) They shall come into force on the date of their publication in the Official Gazette.
2. In Post Office Time Deposit Rules, 1981—
   (i) in Rule 6, sub-rule (3), after clause (b), the following clause shall be inserted, namely:—
        "(c) where a deposit in an account standing at the post office working on Core Banking platform become due for repayment, the account shall be automatically renewed from the date of maturity for the same period for which it was opened initially and the deposit shall be eligible for rate of interest ' applicable on the date of renewal."
        in rule 8,—
        (a) clause (a) shall be omitted;
        (b) for clause (aa), the following clause shall be substituted, namely:—
         (aa) Where a deposit in 1-year, 2-year, 3-year or 5-year account is withdrawn prematurely before the expiry of 1 year from date of deposit, interest at the rate applicable to post office savings account from time to time shall be payable to the depositor."

No TDS on deposits doesn't mean these are tax-free

Are you receiving emails or telephone calls from banks advising you to invest in recurring deposits because there is no tax deducted at source (TDS) in this case? Remember, such investments aren’t tax-free.

No TDS merely means the bank will pay you the entire interest amount without forwarding the tax on it to the government. However, the fixed deposit holder will have to include this interest income in her/his total income and pay tax on this, according to her/his tax bracket.

“There is a common misconception if there is no TDS, it is tax-free. But whether it is recurring deposit, post-office deposits, national savings certificates, or any other savings, if there is no TDS, the interest income is taxed. The only difference between these and fixed deposits is the bank or post office will not deduct tax at source,” says Sanjeev Gokhale, a chartered accountant.

Banks offer the same rate of interest on fixed deposits and recurring deposits. For fixed deposits, you invest the money in a lump sum, while in the case of recurring deposits, you invest once every month. This instrument is encouraged as a way of instilling discipline among investors.

The difference is in the case of fixed deposits. If the interest exceeds Rs 10,000 in a financial year, the bank will deduct 10 per cent tax before crediting the interest to the account. However, this is not the only tax the deposit holder is liable to pay. “This is another common misconception. Many people think they have to pay the remaining 20 per cent tax while filing tax returns. Or, he/she can also pay through advance tax,” Gokhale says.

A few months ago, it was reported the income tax department had issued notices to several people who had not filed returns. Among them were those who had received interest income of more than Rs 50,000. If you receive such a notice, you will have to pay the tax, as well as interest for the delay. The interest is one per cent a month from the last date of filing returns (July 1). The penalty for not filing returns is also charged at the same rate.

So, whether you invest in fixed deposits, recurring deposits or tax-saver post office schemes, remember to include the interest income while filing tax returns. The only case in which you don’t have to pay income tax on fixed deposits is if you have no other source of income and your income is below the threshold taxable limit. For this, you have to file Form 15G, stating you have no taxable income. Senior citizens have to file Form 15H. In many cases, senior citizens feel if they have done this, they are not liable to pay tax. But if you have two or three fixed deposits in separate banks and you submit a Form 15G or 15H in all the banks, you will have to pay tax if the total interest from all the fixed deposits exceeds the taxable income limit, says chartered accountant Arvind Rao.

“Since last year, while submitting Form 15G, deposit holders have to state the deposits they have with other banks. So, banks have to report two types of interests—one on which TDS has been deducted and the other on which it hasn’t,” he says.


Points to remember while filing TDS statements for 4th Quarter of FY: 2013-14

One should take care of the following information before submitting TDS statements for 4th Quarter of Financial Year 2013-14

Payment of Taxes deducted/ collected:

  • In accordance with Central Government Account (Receipts and Payments) Rules, 1983, Government dues are deemed to have been paid on the date on which the cheque or draft tendered to the bank, was cleared and entered in the receipt scroll.
  • Rule 125 of Income Tax Rules, 1962 provisions for Electronic Payment of Tax by way of internet banking facility, for a Company and a Person to whom provisions of section 44AB of the Act are applicable.

Timely Filing:

  • The due date to file TDS statements for Q4, FY 2013-14 is 15th May, 2014.
  • Please submit the statement within due date to avoid Late filing fee, which, being statutory in nature, cannot be waived

Correct Reporting:

  • Please use your correct contact details, including Contact Number and email IDs in TDS Statements.
  • It is very important to report correct and valid particulars in respect to deductor and deductees. Please report the TAN of the deductor, Category (Government / Non-Government) of the deductor, PAN of the deductees and other particulars of deduction of tax correctly in the quarterly TDS statement.
  • Please make use of TAN-PAN Master from TRACES to Validate PAN and name of deductees before quoting it in TDS statement. Please note that there are restrictions for correction of PAN.
  • Quote correct and valid lower rate TDS certificate in TDS statement wherever the TDS has been deducted at Lower/Nil rate on the basis of certificate issued by the Assessing Officer. Please raise Flag “A”/ “B”, as appropriate, and quote valid and correct Certificate Numbers.
  • TDS statement must be filed by quoting challan(s) using correct Challan Identification Number (CIN), validated by CSI (Challan Status Inquiry) File and correct Book Identification Number (BIN), as appropriate.
  • Please maintain your correct Contact details in your Registration profile at TRACES.

Complete Reporting:

  • Please ensure completeness of your TDS statement by including all your deductees. Please note that the obligation to report each transaction correctly in the relevant quarter is on the deductor and non-compliance amounts to incorrect verification of completeness of TDS statement.
  • Completeness of statement will ensure that a C5, C3 or C9 correction can be avoided. It may be noted that CPC (TDS) does not encourage C9 corrections by addition of a new challan and underlying deductees.
  • Please also complete Annexure II (in case of 24Q) for all deductees employed for any period of time during the current financial year, including Annexure I for TDS details.

Downloading TDS Certificates from TRACES:

  • On the basis of information submitted by the deductor, CPC(TDS) will issue TDS Certificates that can be correct depending on correct and complete reporting by deductors.
  • Your attention is invited to CBDT circulars 04/2013 dated 17.04.2013, No. 03/2011 dated 13.05.2011 and No. 01/2012 dated 09.04.2012 on the Issuance of certificate for Tax Deducted at Source in Form 16/16A as per IT Rules 1962. It is now mandatory for all deductors to issue TDS certificates after generating and downloading the same from TRACES.
  • Please note that under the provisions of section 203 of the Income Tax Act, 1961 read with rule 31A, Certificate of tax deducted at source is to be furnished within fifteen (15) days from the due date for furnishing the statement of tax deducted at source.


File Income Tax Return for Asstt. Year 2014-15 without login on TRACE.

The Income Tax Department has developed the latest JAVA Technology ITR Forms ITR-1 (Sahaj) & ITR-4S (Subam) which have been made to make it user friendly for Asstt. Year 2014-15.  This utility can be run on Windows 7.0 or above and latest Linux operating systems, where Java Runtime Environment Version 7 Update 13 (jre 1.7 is also known as jre version 7) or above is installed.

Features of ITR Form :
  1. New - On click of this button, a new copy of the ITR form will be available. If you have already opened the ITR form, you will be prompted to save the earlier copy.
  2. Open -This option is for importing the XML (successfully generated earlier) of a particular A.Y. Select the path and import the XML. You should check/validate the contents before finalizing upload/submission. 
  3. Save - You can save your completed XML in the desired path/location of your desktop. 
  4. Save Draft - This option can be used to save your XML. Please note you cannot upload an XML which was saved using the ‘Save draft’ option. Only a complete XML generated using the ‘Save’ option can be uploaded successfully. 
  5. Prefill -This option can be used to auto-fill your Personal, Address and Tax details. You will be prompted to provide your User ID, Password and DOB/DOI to fetch the data. It is advisable to complete this activity before you start entering other data. Please check/validate the contents. Please make sure you're connected to the internet to avail this feature. 
  6. Re-Calculate - On clicking this button, the data in the utility will be re-calculated. This is to provide with the utility based calculation/validation. 
  7. Submit -Click this button to upload the XML in e-Filing portal. You'll be prompted to provide your e-Filing credentials, User ID, Password and DOB/DOI. Post submission, the success message and the acknowledgment number will be displayed. You will be able to download ITR-V. Please make sure you're connected to the internet to avail this feature. (if the return is submitted without a DSC) as well. 
  8. Help - This option will let you know the shortkeys, instructions, settings and how to use this ITR form. 
  9. Previous/Next- These will help you to navigate to the various tabs of the ITR form.
Important Shortcut keys :

1 Alt + N Opens a new ITR
2 Alt + S Saves the ITR in the user desired path
3 Alt + F4 Closes the utility
4 Alt + I Imports the XML file
5 Alt + F Pre-fills the ITR
6 Alt + C Clears the validation errors
7 Alt + D Hides/Shows the validation window
8 Alt + G Opens the SUBMIT screen to submit the ITR
9 Alt + R Re-calculates the tax details as per the Utility

Latest ITR- I (Sahaj)
Latest ITR- IV-S (Sahaj)

e-Filing of Income Tax Return is Mandatory for Asstt. Year 2014-15.

Any assessee having total income of Rs.  5 Lakhs and above from AY 2013-14 and subsequent Assessment Years.

Individual/ HUF, being resident, having assets located outside India from AY 2012-13 and subsequent Assessment Years.

An assessee required to furnish a report of audit specified under sections 10(23C)(iv), 10(23C)(v),10(23C)(vi) ,10(23C)(via) , 10A, 12A(1)(b), 44AB, 80-IA, 80-IB, 80-IC, 80-ID, 80JJAA, 80LA, 92E or 115JB of the Act, shall furnish the said report of audit and the return of Income electronically from AY 2013-14 and subsequent Assessment Years.

An assessee required to give a notice under Section 11(2)(a) to the Assessing Officer from AY 2014-15 and subsequent Assessment Years.

All companies.

Firm (to whom provisions of section 44AB is not applicable), AOP, BOI, Artificial Juridical Person, Co-operative Society and Local Authority required to file ITR 5 from AY 2014-15 and subsequent Assessment Years.

An assessee required to funish return u/s 139 (4B) in ITR 7.

A resident who has signing authority in any account located outside India.

A person who claims relief under sections 90 or 90A or deduction under section 91.


Will the 7th CPC Extend Child Care Leave for Male Employees Too?

Child Care Leave, introduced by the 6th CPC, was a boon for women employees. 

Women employees have for long, been entitled to Maternity Leave. The 90 days paid leave granted as maternity leave was extended to 135 days by the 5th CPC. The 6th CPC further increased it to 180 days. 

Based on the very reasonable request presented by ATMAJA (Association of Adoptive Parents), the Government announced ‘Child Adoption Leave’ for female employees in 2006. Orders were issued to grant 135 days leave for female employees who adopt child upto one year of age. 

The 6th CPC introduced a family welfare privilege for female employees. Consequent upon the decisions taken by the Government on the recommendations of the 6th CPC relating to Maternity Leave and Child Care Leave, the Central Govt decided that the existing provisions of Maternity Leave enhanced to 180 days.

Leave of the kind due and admissible (including commuted leave for a period not exceeding 60 days and leave not due) that can be granted in continuation with Maternity Leave provided in Rule 43(4)(b) shall be increased to 2 years.

Women employees having minor children may be granted Child Care Leave for a maximum period of two years (i.e. 730 days) during their entire service for taking care of upto two children whether for rearing or to look after any of their needs like examination, sickness etc.

Only female employees were entitled to these leaves in order to provide health care and education supervision requirements for her two children. Although there were difficulties in implementing this decision, the announcement was welcomed by women employees. 

But this also created a sense of longing among the male employees. 

Were they not concerned about their family’s welfare? 

Was their presence not required in health and education related issues of their children? 

‘Why are we being denied this allowance?’. Men employees were wondered. 

But some male staff themselves wondered, it is impossible to give the same privilege to male employees too, who constitute 90% of the government workforce.

One could also hear demands that if not 730 days, at least half of it should be given to the male employees. 

Some suggest that the allowance should be made in genuine cases after necessary enquiries. 

Some also suggest that in cases where the husband and wife are employed, the leave should be given to both. 

Everybody has a right to demand…!

The request to give this privilege to men who have lost their wives, to look after their children sounds very reasonable. 

Children who have lost their mothers require the care and presence of their fathers. 

Will the 7th CPC consider this demand?


How to convert Form 26AS (PAN Ledger) ".TXT" file to ".XLS" file ?

The annual statement (Form No. 26AS) will be issued for all tax deducted and tax collected at source from FY 2005-06 onwards after the expiry of the financial year.  The PAN-wise ledger account will be created after matching the information in the TDS/TCS statements filed by the deductor/collector and the details of tax deposited in banks coming through On Line Tax Account System (OLTAS).

Form 26AS is most important document for tax payers as it is a tax payment and deduction ledger for them. It shows Tax deducted /collected amount by deductors, Amount paid with TDS against form 15G/15H, tax paid by tax payer like advance tax,self assessment tax etc. Further it also shows refund amount . Every tax payer should match tax amount shown in form 26AS with tax claimed in Income Tax return before filing of income tax return. Now income Tax department have given automatic population of TDS entries in Income tax return from pan ledger/Form 26AS.

Form 26AS can be downloaded by three methods:
  1. Through Income Tax India efiling login password.
  2. Through online Banking account login password.
  3. Through TIN-CPC website.
Form 26AS can be viewed online in HTML format and can also be downloaded in PDF or text format. The password for form 26AS file is Date of Birth provided in PAN database in ddmmyyyy format.

Steps to convert Form 26AS .txt file to .xls file
  1. File received in .txt format
  2. Select the complete Text and copy
  3. Selected Text Paste into MS Excel worksheet
  4. Select Data
  5. Select option Text to columns
  6. Select the entire first column “A” in the worksheet
e-Tutorial on how to convert Form 26AS text file to excel file.

TDS Deduction on Mobile Tower Rent comes u/s. 194-I not u/s. 194C

Income Tax Department had clarify that the renting of mobile tower would attract lower TDS Deductions u/s. 194-I and not u/s. 194C on the grount of Receipts from provision of passive infrastructure services to the mobile operators amount to renting and would attract lower TDS deduction under section 194-I and not under section 194C.


  1. The petitioner, Indus Towers Ltd., provided passive infrastructure services to the mobile operators ('customers'), which, inter-alia, included, tower, shelter, diesel generator sets, batteries, air conditioners, etc.
  2. It applied for issue of a lower deduction certificate at rate of 0.5% on its project receipts under Sec. 194C of the IT Act, but AO issued lower deduction certificate at rate of 2.5% under Sec. 194-I of the IT Act.
  3. Writ was filed to challenge the revisionary order of CIT who affirmed the decision of AO.

  • The issue before the High Court was whether the activity, i.e., provision of passive infrastructure services by petitioner to the mobile operator would constitute renting within the extended definition under Explanation to Section 194-I or whether the activity was service without any element of hiring or letting out of premises?


  • It was the 'operative intention of the parties' which had to be ascertained to decide whether the arrangement amounted to a lease or a mere license as decided by the Supreme Court in case of Rajbir Kaur v. S. Chokesiri and Co., AIR 1988 SC 1845.
  • As per the service agreement between assessee and the customers it was found that, although the access to infrastructure was given to the mobile operators, yet the possession and control of the property were with the petitioner.
  • The dominant intention in these transactions – between petitioner and its customers – was the use of the equipment or plant or machinery. Therefore, the submission of the petitioner that the transaction was not 'renting'and would be covered under Section 194C, was incorrect.
  • Equally, the revenue's contention that the transaction was one where the parties intended the renting of land (because of the right to access being given to the customer) was also incorrect. The underlying object of the arrangement or agreement was the use of the machinery, plant or equipment, i.e., the passive infrastructure.
  • The 'operative intention' here was the use of the equipment. The use of the premises was only incidental.
  • Therefore, the provision of passive infrastructure services to the mobile operators amounted to 'rent' for use of the machinery, plant or equipment.
  • So, it was concluded that tax deduction be made at the rate of 2%, as prescribed under section 194-I for the use of any machinery, plant or equipment.

1st Quarter (TDS Return) Action Plan released by CBDT for Fin. Year 2014-15.

CBDT has releases Central Action Plan for departmental officers for 1st Quarter of Financial Year 2014-15 on 3rd April, 2014.  This Central Action Plan is active for the First Quarter (Q1) i.e. April-14 to June-2014 of the Financial Year 2014-15 by the Letter F.No. 380/2/2014-IT(B), Dated 31.03.2014.