Alignment of interest rates for late payment to Government account of TCS

Union Budget 2024-25 (Full) + FINANCE (No.2) Bill, 2024

Section 206C of the Act provides for the collection of tax at source (TCS) on business of trading in alcoholic liquor, forest produce, scrap etc. Sub-section (7) of the section 206C provides that persons who fail to collect tax or after collecting, fail to deposit the same to the credit of the Central Government shall be liable to pay simple interest at the rate of one percent for every month or part thereof on the amount of such tax from the date on which such tax was collectible to the date on which the tax was paid.

2. It was noted that the rates of interest applicable for late collection / late deposit of TCS are not in line with provisions of sub-section (1A) of section 201 pertaining to late deduction / deposit of TDS. A higher interest rate of 1.5% is applicable where tax has been deducted but not been deposited to Government account due to the gravity attached with the failure, as it deprives the deductee of due tax credit and does not reach the Central Government in time. Same difficulty is also faced by the collectee.

3. To align the rate of simple interest charged on failure to pay to Government account after collection of tax it is proposed to amend sub-section (7) of section 206C, to specify that simple interest for non-payment of tax collected at source to Government account, is to be increased from one per cent. to one and one-half per cent. for every month or part thereof on the amount of such tax from the date on which such tax was collected to the date on which such tax is actually paid.

4. The amendment will take effect from the 1st day of April, 2025.

[Clause 70]

Full Text:

Union Budget 2024-25 (Full) + FINANCE (No.2) Bill, 2024

Dated: 24-7-2024