Introduction Readers are aware that the Finance Act, 2012 introduced section 234E in the Income-tax Act, 1961 with effect from 01/07/2012. It requires payment of a late fee of Rs. 200/- per day for delay in submission of TDS returns. This is in addition to the interest payable on belated payment of TDS. Although, the late fee is restricted to the amount of TDS, it is very unfair. In fact, it has become a nightmare to small tax-deductors. The Hon’ble Bombay High court has upheld its constitutional validity of the provision in the case of Mr. Rashmikant Kundalia and another vs. Union of India and others (Writ Petition No.771 of 2014)
Unfairness
Section 194 IA was inserted by the Finance Act, 2013 w.e.f. 01/06/2013. It requires any person, being a transferee, responsible for paying to a resident transferor any sum by way of consideration exceeding Rs.50 lakh to deduct 1% as income tax thereon.
For any other type of TDS viz. u/s. 192, 194C, 194J etc. (collectively referred as other TDS) one need to have TAN but for the purpose of TDS u/s. 194IA, it is to be paid on PAN of deductor.
In case of other TDS, payment of TDS is to be made on or beforethe 7th of next month and TDS returns are to be filed at least 15 days after the end of the quarter. Therefore, there is a breathing time between payment of tax and filing of TDS return.
However, in case of 194IA, there is no separate return as such. The return is embedded in the challan itself. And there lies the problem.
As all are aware, the late fee u/s. 234 E has created havoc across the board. The Hon’ble Bombay High Court has upheld the constitutional validity of the section. Many deductors were not aware of this draconian fee applicable to TDS u/s. 194 IA.
In case of the other TDS, if the payment is delayed by, say a month, but before the due date of filing return, he will be liable to pay only the interest but not the late fee once the TDS return is filed in time.
However, if there is a delay in payment of TDS u/s. 194 IA, one has to pay interest as well as late fee u/s. 234E. Thus, the levy of late fees become automatic and results in double jeopardy.
It may be noted that instances for average individual paying for an immovable property maybe once or twice in his lifetime. The provision of TDS u/s. 194 IA is applicable to every transaction exceeding Rs. 50 lakh irrespective of the fact whether deductor is educated or uneducated, salaried or pensioner, housewife or senior citizen. It is improper to expect everyone to be well aware of the stringent provisions and deadlines just because the consideration exceeds Rs. 50 lakh.
Rather, it is pertinent to note that individuals and HUFs whose turnover of previous year has not exceeded the limit prescribed u/s. 44AB are exempt from the TDS provisions u/s. 194C, 194 J, 194 I, etc. There is no sound logic in thrusting such onerous burden u/s. 194IA on a layperson.
Suggestion
Ideally, section 234E itself deserves to be omitted from the Act. There was already a penalty of Rs. 100/- per day in terms of section 272A which in itself is on higher side. In any case, late fee should not be levied on individuals and HUFs in respect of delay in complying with section 194IA.
