Finance Minister Nirmala Sithraman had presented the Union Budget 2024-2025 on Tuesday with major amendments proposed to both direct and indirect tax regimes.
The Budget 2024 also proposes many changes aimed at easing the compliance burden for taxpayers regarding TDS ( Tax Deducted at Source ) payments. Currently, delays in these payments can lead to criminal prosecution if not paid by the specified due date, typically the 7th day of the following month after deduction.
The new proposal seeks to decriminalize such delays, allowing payments to be made up to the filing date of the TDS return for the respective quarter. This adjustment grants taxpayers more time to fulfill their TDS obligations without the threat of prosecution, although interest on delayed payments will still apply.
However, certain categories of TDS payments, such as those related to winnings, income from the transfer of virtual digital assets, or payments made partly or fully in kind ( perquisites ), will not benefit from this relaxation. This exclusion stems from the infrequent nature of these transactions, which typically do not recur regularly, unlike TDS under other categories like contractual payments or lease payments.
Additionally, Budget 2024 proposes to introduce Standard Operating Procedures (S OPs ) for handling TDS defaults and to rationalize the compounding guidelines for such defaults. These changes, if approved, will come into effect from October 1, 2024. It remains to be seen how ongoing prosecution proceedings will be managed post-September 30, 2024, under the revised provisions and compounding guidelines once finalized.
In the Budget Speech, Nirmala Sitharaman stated that, “Further, I propose to decriminalize delay for payment of TDS up to the due date of filing statement for the same. I also plan to provide a standard operating procedure for TDS defaults and simplify and rationalize the compounding guidelines for such defaults.”
The current provisions stipulate severe penalties, including imprisonment ranging from three months to seven years, along with financial penalties, for defaulters who fail to deposit TDS within the specified period.
Compounding of offenses allows for the waiver of prosecution charges upon payment of applicable fees. Under existing guidelines, cases involving TDS amounts of ₹25 lakh or less and delayed deposits of less than 60 days are generally not processed for prosecution. Future clarity on the new compounding guidelines and SOPs is eagerly awaited from tax authorities.
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