ASSESSEE IN DEFAULT AND IMPLICATIONS THEREOF

 WHO IS THE ASSESSEE IN DEFAULT?

Any person, including the Principal Officer of the Company and the employer, shall be considered as the assessee in default if they are required to deduct the TDS in accordance with the provisions of the act but,

Ø Fails to deduct the tax or

Ø After deducting fails to pay to the government

They shall be deemed to be an ‘assessee in default’ in respect of the amount of such tax not paid or not deducted.

 

 

THE IMPLICATIONS OF BEING AN ASSESSEE IN DEFAULT

When the payer who is required to deduct the tax fails to do so, or fails to pay the government tax deducted after deducting, they shall be liable to pay the government.

a)    The amount of tax arrears that he failed to deduct

b)    Interest under section 220(2) at the rate of 1% per month from the expiry of 30 days on service of notice u/s 156

c)    Penalty (not exceeding the amount of tax arrears).

d)    Interest on late deduction: 1% per month – from the date on which the tax was required to be deducted to the date on which tax was deducted

e)    Interest on late payments: 1.5% per month - from the date on which the tax was deducted to the date on which the tax was paid.

f)     Charge creation of assets: Charge on assets of the payer, principal officer, and employer shall also be created to the extent of the amount of tax arrears and interest.

 

When a person is not considered an assessee in default even though he has not deducted the proper taxes?

When a person is required to withhold the taxes and fails to do so, shall not be treated as an assessee in default if the below-mentioned conditions are duly satisfied.

 

v The payee has filed the return of income u/s 139

v The payee has considered the said amount in his return of income

v The payee paid the taxes applicable on the total income declared

v The payee has provided a certificate in from 26A to this effect from a Chartered Accountant in Practice.

v The payer has paid interest @ 1% per month from the date on which the tax was required to be deducted to the date when payee has filed his return of income.

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CA Ramakrishna Sanjay