TDS not deducted for job workers

- Payment to job worker attracts TDS u/s 194C. Threshold limit is Rs.1 lacs on aggregate basis or Rs. 30k for single invoice. If the recipient is individual or HUF, TDS rate is 1% otherwise it is 2% (i.e. in case of partnership firms, LLP, company etc.) 

- First of all apply for TAN No. immediately and file TDS returns atleast for F.Y. 2020-21. Assuming job worker is individual, TDS rate would be 1% and total TDS for F.Y. 2020-21 is Rs.46k. Late fees an interest will be applicable which will not be too high. Maximum late fees would be 46K. If not deducted and deposited before filing return of income for the F.Y. 2020-21, 30% of 46 lacs will be disallowed and treated as income for the F.Y. 2020-21. Also it will be reported in the Tax Audit report which impacts the credibility of the business.

- For F.Y. 2019-20, it should have been reported in the tax audit report and effect of disallowance of 30% of 6 lacs was considered in the ITR of F.Y. 2019-20. No need to worry if below conditions are satisfied.

(i) Recipient job worker was resident in India in F.Y. 2019-20

(ii) Recipient job worker has filed ITR for F.Y. 2019-20

(iii) He has considered income of 6 lacs in his ITR of F.Y. 2019-20

(iv) He has paid the tax due on the income declared in his ITR; AND

(v) The PAYER furnishes ELECTRONICALLY a certificate to this effect from a Chartered Accountant in Form No. 26A

If the above conditions are satisfied and disallowance was made in the F.Y. 2019-20 then you can can claim same disallowance as an expense in the year in which ITR was filed by the resident recipient i.e. job worker.

Assuming you only have a TDS liability on payment to job-worker. 

Hi

You need to pay the TDS now along with interest and file TDS returns for all the quarters with late fees.

Hi

TDS needs to be deducted u/s194C by an individual if the turnover in the preceding FY exceed 1 crore on case of business. Since you had turnover of 2.5Crs in FY19-20 you are liable to deduct TDS in FY20-21.

A failure to deduct TDS has following consequences:-

1. Pay the amount of tax u/s 200 (1)

2. Pay interest u/s 201 (1A). 1% pm from the date tax was deductible till the date of deduction, or, date of return (if the payee has filed the return). and 1.5%pm from date of deduction to the date of payment.

3. 234E - Pay fee for non submission of statement u/s 200(3). 200per day till default continues subject to maximum of TDS amount

4. Penalty u/s 271C equal to TDS amount.

5. Penalty u/s271H for non furnishing of statements u/s 200(3) from 1000 to 100000.

Please also note that if any notice has been received by you u/s156 toward payment of tax, interest, etc, such amount needs to be paid within 30 days of the service of notice

The rate of TDS u/s 194C is 1% if the payee is individual or HUF and 2% if any other person. In case payee hasnt submitted PAN, TDS is higher of rates in force or 20%.

From 14.05.2020 to 31.03.2021 the TDS rates were reduced to 0.75% and 1% respectively.

kindly get back for any clarification and leave feedback.

thanks

- From 14.05.2020 till 31.03.2021, rates were reduced by 25%.

In case you have forgot to deduct TDS for FY 19-20, you can ask your Job worker to provide you CA certificate that he has considered that Rs 6 lac while calculating his income. In cases where you have CA Certificate you wont be required to bear any penalty for non compliance with provision of TDS. 

You can do same for FY 20-21 also. 

or else Pay the TDS & make payment to vendor after deducting TDS amount. ( FY 20-21) 

You can still deduct and deposit TDS and lay interest on same or else you'll have to disallow the same in audit and pay interest and penalty as well.

If you need any assistance feel free to contact me.

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Thank you

Hi