Is interest leviable if TDS is not deducted but deductee pays tax?
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Yes, interest is leviable in a case where TDS is not deducted but the deductee pays tax.
As per proviso to Section 201(1), the payer shall not be deemed as an assessee in default if tax is not deducted but certain conditions as mentioned in the provision are fulfilled.
Further proviso to Section 201(1A), provides that where such assessee is not deemed to be an assessee in default in the purview of the above-discussed provision, then the interest shall be payable from the date on which such tax was deductible to the date of furnishing of return of income by such payee.
Detailed text from Act of above-discussed provisions is as follows:
Proviso to Section 201(1)
” Provided that any person, including the principal officer of a company, who fails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid to a payee or on the sum credited to the account of a payee shall not be deemed to be an assessee in default in respect of such tax if such payee-
(i) has furnished his return of income under section 139;
(ii) has taken into account such sum for computing income in such return of income; and
(iii) has paid the tax due on the income declared by him in such return of income,
and the person furnishes a certificate to this effect from an accountant in such form as may be prescribed”
Proviso to Section 201(1A)
” Provided that in case any person, including the principal officer of a company fails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid to a payee or on the sum credited to the account of a payee but is not deemed to be an assessee in default under the first proviso of sub-section (1), the interest under clause (i) shall be payable from the date on which such tax was deductible to the date of furnishing of return of income by such payee. “
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