TDS - The Timelines

In Tax Deducted at Source (TDS) compliance one of the important thing to remember and comply is the timelines which when followed properly can ensure savings of unnecessary burden of interest and penalties because if there is even a single day delay in the compliance it can result in the liability of Interest being charged from the very month in which the liability to deduct aroused and may also result in the penalty of 100% and upto 300% of the TDS amount and delay in filing of return can raise the penalty liability of Rs. 200/- per day.

The timeline of the TDS compliance can be divided into 4 major parts:

1. The deduction timeline;
   1. The deposit timeline;
   1. The return filing timeline; and
   1. The certificate issue timeline.

Let’s understand these timelines:

1. The deduction timeline: Under the TDS compliance the deduction as stipulated under various sections of TDS has to made at the time of “credit of the ledger of the vendor or payment of monies” WHICHEVER IS EARLIER; meaning if suppose the business has a liability to deduct TDS on say Contractor payment then the deduction should be made at the time of either
   1. If any advance is given against the provision of services without any invoice being received, then at the time of payment of such advance; or
   1. If the invoice is received before the payment, then at the time of receipt of invoice
   1. Whichever of the two incidents happens first.

If this timeline of deduction is missed it will lead to generation of interest liability @ 1% per month (including part of the month) from the date of deduction and also proposed penalty of 100% and upto 300% of the TDS amount, as the Assessing Officer may deem fit.

• The deposit timeline: Under the TDS compliance for the deposit timeline the TDS as deducted under point 1 above shall be deposited on or before the 7^th day of the month following the month of deduction. For example, if TDS is deducted on say 15^th December, 2025, then it has to be deposited till 7^th January, 2026.

If the deadline of this 7^th day of the following month is missed even by one day i.e. in above case if the TDS deducted is deposited on 8^th January, 2026 then this late deposit of one day will result in generation of interest liability @ 1.5% per month (including part of the month) for 2 months i.e. for December (the deduction month) and January (the deposit month).

Now one of the most important points: There is a misconception or rather a misbelief that the TDS deducted for the month of March can be deposited upto 30^th April. It is not at all correct because the due date to deposit tax upto 30^th April is only provided for the year end provisions that a business might require to make during its finalization of books and are recorded on the 31^st March, for all other deductions made upto 30^th March the due date remains the same i.e. upto the 7^th of following month meaning the TDS deducted in the month of March upto 30^th March has to be deposited on or before 7^th April.

• The return filing timeline: The Returns under TDS are required to filed quarterly. The timeline of filing these quarterly returns are as below:
  • For Quarter April to June                      : Due date of return filing is 31^st July;
  • For Quarter July to September : Due date of return filing is 31^st October;
  • For Quarter October to December       : Due date of return filing is 31^st January;
  • For Quarter January to March  : Due date of return filing is31^st May

These return filing due date deadlines are to be followed strictly because if there is a delay in filing of return beyond these due dates then a late filing fees of Rs. 200/- per day gets charged.

Point to remember: If there is no deduction in a particular quarter then the business has three options for filing that particular quarter’s return:

1. File a NIL return;
2. File a declaration for NIL deduction; and
3. Neither of the above two.

There might happen sometimes that due to some clerical oversight a TDS deduction was done but not recorded and hence not deposit leading the return for the particular quarter to be NIL. Now in this case there happens two scenarios:

1. If the business had filed return under point A above i.e. a NIL return, then the business will have to revise that particular return and deposit interest as per the timelines as per point 2; and
2. If the business had either filed a declaration for NIL deduction or did not file the return for that particular quarter owing to nil deduction then there will arise two liabilities:
   1. Interest @ 1.5% as per point no 2 above; and
   1. Penalty on late filing of Rs. 200/- per day which may become a hefty amount

Therefore, it is advised to file a NIL return even if there is NIL deduction because the return filing fees might be costly but not filing will become expensive.

• The certificate issue timeline: This is also one of the most important timeline to followed under which the Tax Deduction Certificate commonly known as the Form 16/16A has to be issued to every deductee by the deductor within 15 days from the due date of the filing of the return of the quarter as per the timelines in point 3 above. In the event the above deadline is not followed it may lead to penalty.

Now an important question arises how to follow or remember these timelines. The simplest way is to incorporate a process in your SOP wherein every payment/invoice has to be verified from TDS perspective and after proper deduction to be recorded it in the books and to set a reminder for the deposit in the system for the 5^th day of every month and 20^th day of the following month of every quarter for the filing of return.

Please remember that proper recording of the TDS transactions is as important as deduction of TDS because if the transactions are not recorded properly than the above deadlines might be missed leading to interest and penalty charges.

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