Section 234E of ITA, 1961 : Section 234E: Fee For Default In Furnishing Statements

Explanation using Example

Imagine a small business owner, Mr. Sharma, who employs several freelancers and is required to deduct tax at source (TDS) on their payments. According to the Income-tax Act, he needs to file a TDS return quarterly, detailing all the deductions made. However, Mr. Sharma forgets to file his TDS return for the first quarter by the due date, which is July 31.

If he files the return on August 10, he is 10 days late. According to Section 234E, he would incur a penalty of INR 200 for each day the return is delayed, totaling INR 2,000. He must pay this fee before submitting the overdue TDS return. However, the total fee cannot exceed the total TDS amount he was supposed to deduct.