Question: Have there been any recent changes or amendments made by the government to the prosecution provisions concerning the Tax Deducted at Source (TDS) deposit rules? If so, what specific modifications have been implemented, and how do they impact TDS deductors regarding their obligations and potential penalties for non-compliance?
Answer given by CA (Dr.) Suresh Surana: Yes, the government has amended the provisions relating to the prosecution of deductor of TDS to facilitate compliance and reduce unnecessary litigation. Previously, if a deductor failed to deposit the tax deducted at source (TDS) with the Central Government within the prescribed timeframe (generally within 7 days of the succeeding month), the deductor could face rigorous imprisonment for a term of not less than three months, extending up to seven years, in addition to incurring a monetary fine.
However, to ease the compliance burden, CBDT issued Circular No. 24/2019, dated 9 September 2019. In that circular the Central Government has provided relief from prosecution proceedings in cases where the non-payment of TDS amounts to Rs 25 lakh or less, and the delay in deposit is less than 60 days from the due date.
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In furtherance of these objectives, Union Finance Minister Nirmala Sitharaman introduced amendments to Section 276B of the Income Tax Act through the Finance (No. 2) Act, 2024, which will be effective from October 1, 2024. Under the amended provisions, the deductor is permitted to deposit the deducted tax prior to filing the return statement for such payments.
For instance, if a deductor withholds tax for the month of October 2024, the due date for depositing such tax is 7 November 2024. Failure to make this deposit may result in penalties and imprisonment for a term of not less than three months, which may extend up to seven years. However, under the amended provisions, the deductor may deposit the tax until the due date for filing the return for such payment. In this case, the final date for depositing the amount without incurring penalties or imprisonment is 31 January 2025. Nevertheless, interest on the delayed payment will still be applied. This amendment to Section 276B of the Income Tax Act provides additional time for employers to comply with the requirement of depositing TDS without inviting prosecution.
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