NEW PENALTIES IN TDS RULE (SEC 271 H and SEC 234E ) FROM SECOND QUARTER 2012

TDS process has undergone tremendous changes and stream lining since the last few years. With the help of technology ITD along with NSDL are day by day introducing systems and procedures which will ultimately help the tax payer to get the correct credit of taxes paid through the TDS system.  With this regard, some years back the department introduced the system of correction filing of regular returns. But they have also observed that number of corrections have increased since; which not necessarily easing the work of the department to get the system streamlined.

With this in mind, the department has introduced new penalty provisions. In the newly introduced clause the penalty ranges from Rs 10,000 to Rs 1,00,000 for mistakes and inaccurate details in the e-Return procedures. This amendment was introduced through budget 2012 and proposed effective date is July 1st 2012. Hence from second quarter any intentional/unintentional mistakes in the original or correction returns will fall heavily on the deductor as he/she will be charged anywhere in the range from Rs 10,000 to Rs 1 lakh!  (as per newly introduced sec 271H). The common mistakes seen today are incorrect PAN number, incorrect amount deducted and incorrect TDS remittance details like wrong challan number, date or bank information. Hence deductor will have to take an extra caution to verify each and every record in the quarterly e-Returns for TDS and TCS.

The department is positive that this charge will surely lower the scale of corrections happening and would also help in speed up the process of revenue collection through TDS which is a huge source of revenue for the government.
Another sec  234E has been introduced which proposes a fee for Rs 200 per day(subject to maximum of total amount of TDS/TCS) in case of delayed furnishing of TDS/TCS. What is important and noticeable is it is a prepaid and mandatory fee which has to be paid along with delayed filing.  Earlier there was a section 271H in which the deductor had to pay Rs 100 per day for delay in filing. But this was neither mandatory nor was it prepaid. This has been introduced to ensure timely filing and in turn can ensure timely processing of TDS returns.

Thus we have seen that day by day the TDS rules are becoming more stringent for the deductor and non compliance is becoming a very costly issue. The department on the other hand also should also take some steps to ensure easier assistance for deductor queries for easier filing of returns.