Punishment as Interest to Deductor under section 201(1A) and (2) of Income Tax.

The interest charges as per the Income Tax u/s. 201 (1A) and (2) when the payment of TDS will not deposit in Time which was deducted from Employee in Central Government Account by the Deductor. The Income Tax Department should be penalized/charged as Interest on Late Payment/Deposit. Besides the above penalty, if any such person, principal officer or company does not deductor whole or part of the tax or after deducting fails to pay the tax as required by or under this Act, he or it shall be liable to pay simple interest as under :

Period of Defaults		Rate of Interest
(a)	From the date the tax was deductible to the date on which such tax id deducted	1% p.m. or part of the month
(b)	From the date on which such tax is deducted to the date on which such tax is actually paid	1.5% p.m. or part of the month

Exemple:

S. N.	Nature of Exp.	Date of Payment/ Credit	Date of Deduction of Tax	Date of Deposit of Tax	Rate of Interest	Period for which it’s payable
1	Payment to Contractor	16-08-2010	31-03-2011	31-07-2011	1% 1.5%	From 16-08-10 to 31-03-11 i.e. for 8 months From 01-04-11 to 31.07.11 i.e. for 4months
2	Payment to Contractor	16-08-2010	16-08-2010	31-07-2011	1.5%	From 16.08.10 to 31.07.11 i.e. for 12 months
3	Payment to Contractor	16-08-2010	30-04-2011	30-09-2011	1% 1.5%	From 16.08.10 to 30.04.11 i.e. 9 months From 01.05.11 to 30.09.11 i.e. 5 months
4	Rent	31-03-2011	31-03-2011	30-04-2011	No Interest payable as tax has been within the due date.

Further the amount of tax deducted together with interest for delayed payment shall be a charge upon all the assets or the person or the company as the as may be.

Where the assessee failed to deduct tax under section 194C, but it was found that the contractor had paid the advance tax and self-assessment tax over and above the tax payable, thereby not causing any loss to the revenue, if the revenue is permitted to levy interest under section 201(1A) even in a case where the person liable to tax has paid tax on due date, the revenue would derive undue benefit by getting interest on the amount of tax which had already been paid on the due date. Such a position cannot be permitted.

Interest leviable even if tax has been paid by the deductee; Where the tax has been paid by the deductee-assessee, tax can not be incomes from the deductor, but interest under section 201(1A) shall be payable by the deductor tillthe date of payment of tax by the deductee-assessee.

Posted in: No Penalty,Penalty,Tax on Interest Income