consequenses of short deduction of TDS

The person responsible to deduct tax is attracting interest u/s.201, Penalty u/s.221, Penalty u/s.271C, Income tax Act, 1961

As per my understanding the Lower TDS is to be made only after the date of the lower TDS certificate received by the Deductor. if short deduction is made then, proportionate expense gets disallowed. Illustration: TDS u/s. 194C @ 2.06% (no SC) for Rs. 10000 = Rs. 206 has to be deducted but deducted at 1.03% Rs. 103 then proportionately i.e (106/206)*100=50% of the expenditure will be disallowed, and Interest will be levied on the Short Deduction under relevant provision.Hope u understand now.

I am not agree with Mr. Shreeram. Tax deductor should pay remaining amount of TDS with interest. No proportionate expenditure wil disallow by the Department as there is no provision. Disallowance will be made while no tax is deducted from the prescrib expenditure.

Dear sir, I want some Explanation for TDS head,one man power company supplied to labour our compant,these transaction which heads under comes,but manpower company peoples says under professional ,but we are considered under contract (194c),pls clarify this regarding and any case law also given to me. Thanks and regards A.Durai

Mr. Durai, Manpower supply is treated as sub contract and therefore falls under section 194C where the rate of deduction is 2%. If they treat themselves as Professionals then they come under section 194J where the rate of deduction is 10%. Treating themselves as sub contractors will give them more benefit in terms of liquidity. Youcan take stand that they fall under 194C.

Ms. Kalpana, I saw the replies above, but i want add that none have mentioned about 276B and provisions of 40(a)(ia). In Karnataka, prosecution u/s.276B have been suceesful, the Principal Officer has been sentenced to 6 months imprisonment. Difficult to fight TDS offences. 40(a)(ia) will disallow your entire expenses and will jack up your payment of tax, leading to interest u/s 234B.

As per prvisions of IT Act, 1961 IF TDS is short deducted or deducted but not deposited into Govt. Dues A/c, The person responsible for deduction of TDS will be assessee in default.A penalty will be levied equal to amount of short deduction.Thus , non deduction of tax at source or after deducting failure to pat to Govt. will result in the following :-
1:- Interest u/s 201 (1A)
2:- Penalty u/s 221, in case of failure to deduct & pay the tax without good & sufficient reason.
3:-Penalty u/s 271C read with section 273B.
Further , in the absence of reasonable cause, failure to pay TDS to Govt., would also be an offence punishable u/s 276B read with section278AA.Further if a person is deemed to be assessee in default , he has to suffer the consequences expressly provided in the Income Tax Act,1961.For kind consederation, no penalty u/s 272A(2) (c) & 272A(2)(g) if penalty is imposed u/s 271C.Joint commissioner shall impose the penalty u/s 271C.