income tax

2024 Budget: Key Changes to Section 271H of Income-tax Act

Budget 2024: Amendment to Section 271H of the Income-tax Act

The 2024 Budget introduces a significant amendment to Section 271H of the Income-tax Act, modifying the penalty relief period for late submissions of Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) statements. Previously, taxpayers had a one-year window from the due date to file belated returns and avoid penalties. The new amendment shortens this period to just one month.

To avoid penalties, TDS/TCS statements must now be filed within one month of the due date, provided that the corresponding TDS/TCS, along with any applicable fees and interest, is paid. This amendment aims to mitigate issues related to late filings, such as discrepancies in TDS/TCS and unwarranted demands from the tax authorities. This revised penalty timeline will come into effect on April 1, 2025, promoting compliance and minimizing processing delays.

Key Provisions of Section 271H

Current Framework of Section 271H

  • Penalty for Non-Compliance: Section 271H addresses penalties for failing to file TDS or TCS returns on time.

  • Previous Relief Period: Under sub-section (3) of Section 271H, no penalty is applicable if the taxpayer can demonstrate that they paid the TDS/TCS, including fees and interest, to the Central Government and filed the corresponding statement within one year from the due date.

Changes Introduced

  1. Revised Filing Deadline: The time limit for taxpayers to avoid penalties is reduced from one year to one month.
  2. Deadline for Belated Returns: Previously, taxpayers could file returns by December 31 of the assessment year. This has now been amended to require timely filing within one month to ensure compliance.

Rationale Behind the Amendment

  • The amendment is intended to streamline the filing process and alleviate the compliance burden on deductors and collectors.
  • Timely submission of TDS/TCS statements is crucial in preventing mismatches that create discrepancies during income tax return processing and in avoiding unnecessary demands.

Effective Date

The changes will be implemented from April 1, 2025, reinforcing the importance of prompt filing of TDS and TCS statements to meet compliance standards.

Conclusion

The amendment to Section 271H represents a crucial shift in penalty provisions aimed at improving compliance and ensuring the timely filing of TDS and TCS statements. Taxpayers should familiarize themselves with these changes to avoid penalties from 2025 onward.