A summary on Section 234E of the Income Tax Act

The constitutional validity of Section 234E has been challenged by the different High courts in the cases appearing before them.

Fee for default in furnishing TDS and TCS statements:

Section 234E of the Income Tax Act, 1961 which has been introduced by the Finance Act, 2012 which is effective from 1.7.12 states that a fee of Rs. 200/- should be levied for every day’s delay in filing the statement of Tax Deducted at Source or Tax Collected at Source by the deductors and the same can be up to the TDS amount.

The validity of section 234E has been challenged:

The constitutional validity of Section 234E has been challenged in the N0-120 Kerala High Court in the leading case of Narath Mapila LP School vs. Union of India, WP(C) No. 31498/2013(J). By an interim order passed on 18.12.2013 the Kerala High Court allowed the petition and granted a stay of proceedings for the next two months.

Another Writ Petition to challenge the constitutional validity of section 234E has been filed in the Jodhpur Bench of the Rajasthan High Court in Om Prakash Dhoot vs. Union of India. SY0-301 By an order passed on 15.04.2014 the High Court has directed to issue a notice of show cause to the CBDT and the Union of India as to why the same should not be allowed. It has been held that if there is any recovery from the petitioner the same shall be subject to the ultimate judgment of the Writ Petition.

The deductors to comply with the rules relating to TDS and TCS:

All the deductors are supposed to file their TDS and TCS returns within due time to avoid fee for late filing of the same. The deductors who file their TDS returns through professionals should submit the necessary details to them well before due time and make sure that the same is filed within time.

A late fee is not a form of penalty:

However no action or appeal can be preferred against the fees imposed by the income tax department for late filing of TDS statement under section 234E since as per the rules of the department it is not a penalty but the fees for delay in filing of return. The amount of fee shall not in any case be more than the amount of tax deductible or collectible.

Additional penalty may be levied:

In addition to levy of fees under section 234E, the income tax department may also levy a penalty under section 271H of the Income Tax Act, 1961 amounting to minimum Rs. 10,000/- to maximum Rs. 1 lakh for failure in filing the TDS statement within a year from the due date within which the assessee was supposed to file the said statement. This rule is effective from 1.7.12.