TaxTMI 
TaxTMI 
Fee for Default in Furnishing Statements of TDS/TCS : Clause 427 of the Income Tax Bill, 2025 Vs. Section 234E of the Income-tax Act, 1961
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.... the Income-tax Act, 1961, and its proposed successor, Clause 427 of the Income Tax Bill, 2025, seeks to ensure strict adherence to statutory timelines for filing such statements. The imposition of fees for defaults in furnishing these statements serves as both a deterrent and a compensatory mechanism for administrative inconvenience and loss of revenue oversight. This commentary provides a detailed analysis of Clause 427 of the Income Tax Bill, 2025, situating it within the broader legal context, elucidating its objectives, dissecting its provisions, and comparing it with the extant Section 234E of the Income-tax Act, 1961. The analysis also considers practical implications, interpretative challenges, and areas for potential reform, there....
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....tatements, thus encompassing both deductors and collectors under the TDS and TCS regimes. The phrase "without prejudice to the provisions of this Act" indicates that the levy of fee under Clause 427 is in addition to and not in derogation of any other consequences that may arise under the Act for such default (such as disallowance of expenditure, penalties, or prosecution). 2. Quantum of Fee The fee is statutorily fixed at Rs. 200 for every day during which the default continues. This per diem structure is designed to proportionately reflect the duration of non-compliance, thereby incentivizing early rectification of the default. The quantum is significant enough to act as a deterrent but not so onerous as to be confiscatory or punitive.....
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..... Comparative Analysis with Section 234E of the Income-tax Act, 1961 Textual and Structural Comparison Aspect Section 234E of the Income-tax Act, 1961 Clause 427 of the Income Tax Bill, 2025 Triggering Default Failure to deliver statements u/s 200(3) (TDS) or proviso to Section 206C(3) (TCS) within prescribed time Failure to deliver statement within time prescribed u/s 393(3)(b) (presumably analogous to TDS/TCS statements) Quantum of Fee Rs. 200 per day of default Rs. 200 per day of default Maximum Cap Fee not to exceed tax deductible or collectible Fee not to exceed tax deductible or collectible Pre-condition for Filing Fee to be paid before delivering the statement Fee to be paid before delivering the....
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....lause 427 does not specify a commencement date, implying that its applicability will be governed by the general commencement provisions of the Bill. * Procedural Detailing: Section 234E(3) and (4) provide more granular cross-references to the relevant sections for TDS/TCS, whereas Clause 427 adopts a more streamlined reference to section 393(3)(b). 3. Legislative Evolution and Policy Rationale The transition from Section 234E to Clause 427 is primarily a matter of legislative re-codification rather than substantive change. The policy rationale remains consistent: to ensure timely compliance with TDS/TCS reporting obligations and to provide a simple, predictable consequence for defaults. The re-codification may also reflect an attempt t....
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....ation on Nil Deduction Cases: Addressing scenarios where the tax deductible/collectible is nil would prevent potential abuse or unintended gaps in enforcement. * Procedural Safeguards: While the fee is compensatory, minimal procedural safeguards (such as automated intimation and an appeal mechanism) could be incorporated to address computational or factual errors. Practical Implications for Stakeholders 1. Taxpayers and Deductors/Collectors The provision reinforces the necessity for robust compliance systems and timely reporting. Entities must invest in process automation, staff training, and regular audits to minimize the risk of defaults and the consequent financial impact. 2. Tax Authorities For the tax administration, the provisi....