Finance Minister Nirmala Sitharaman is poised to unveil Budget 2021 on February 1, 2020. Research and advisory firm Taxmann has said in its pre-Budget report that the government should levy a uniform penalty for non-deduction of tax collected at source (TCS) and non-payment of the tax deducted at source.
Laying down the penalty in case of failure to deduct or to pay tax deducted at source, Section 201 of the Income Tax Act states that a deductor shall be liable to pay interest at the rate of 1 per cent per month/part of the month in case there is a failure to deduct tax. But in a situation wherein a tax has been deducted but not deposited, interest is levied at the rate of 1.5 per cent for every month or part of the month.
Tax collected at source (TCS) is the tax payable by a seller; the tax was collected from the buyer at the time of sale.
On the other hand, Section 206C prescribes only a single rate of interest. If the collector fails to collect TCS or after collecting fails to deposit it with the government, interest is levied at the rate of 1 per cent for every month or part month.
Taxmann has recommended that the government should bring parity in penal provisions. And Section 206C could be amended to provide a higher rate of interest in case tax has been collected but not deposited to the credit of central government.