With increasing compliance scrutiny and automated processing of TDS returns, deductors are frequently receiving demand notices under Section 234E for late filing fees. Many taxpayers are unaware that late fees cannot be waived and that demands are being raised for older periods. With the approaching deadline of 31.03.2025, it is crucial to address any pending TDS compliance issues to avoid financial penalties. This article aims to clarify when the late fee is valid, when it is not applicable, and how to ensure compliance to avoid unnecessary financial burden.
Applicability of Late Filing Fee under Section 234E
Section 234E of the Income Tax Act, 1961, mandates a late filing fee for the delayed submission of TDS/TCS returns. If a deductor fails to submit the TDS/TCS statement within the prescribed due date, they are liable to pay a fine of ₹200 per day until the failure continues, subject to the total TDS amount deducted.
Key Aspects of Late Filing Fee (Post 1st June 2015)
Legal Validity – The late filing fee under Section 234E has been explicitly made applicable with the insertion of Section 200A(1)(c) and (d) by the Finance Act, 2015, with effect from 1st June 2015. Prior to this, there was no provision for automatic levy of fees under intimation under Section 200A.
Auto-Adjustment in TDS Intimations – Post 1st June 2015, the late fee is automatically adjusted while processing TDS statements under Section 200A, and the deductor is mandatorily required to pay it.
Upper Limit on Late Fee – The total fee cannot exceed the total tax deducted/collected for the respective quarter.
Non-Waivable Nature – Unlike penalties, the late fee under Section 234E is mandatory and non-waivable, meaning that no appeal or discretion is available to reduce or remove this charge.
Applicability on Older Defaults – Late filing fees for TDS statements filed before 1st June 2015 but processed after this date should not be charged, as per multiple judicial pronouncements.
Relevant Provisions Before and After Finance Act 2015
Section 200A Prior to 1st June 2015 (Before Amendment):
Prior to 1st June 2015, Section 200A allowed for processing of TDS returns, but did not provide for levying a fee under Section 234E. It allowed only for the computation of arithmetical errors, incorrect claims, and interest payable on TDS defaults. There was no legal basis for imposing a late filing fee under Section 234E before this amendment.
Additionally, it was provided that no intimation under this sub-section shall be sent after the expiry of one year from the end of the financial year in which the statement is filed. Furthermore, an incorrect claim apparent from any information in the statement was defined as:
An entry that is inconsistent with another entry in the same or another statement.
A deduction rate that is not in accordance with the provisions of the Act.
Section 200A After 1st June 2015 (Post Amendment):
The Finance Act, 2015, amended Section 200A to include sub-clause (c) and (d), thereby permitting the computation and levy of fee under Section 234E while processing TDS statements. This means that from 1st June 2015 onwards, the late filing fee became enforceable through automated demand intimations.
The amendment also clarified that the intimation of any demand under this section must be sent within one year from the end of the financial year in which the statement is filed.
Judicial Precedents Supporting Non-Imposition of Fee for Periods Before 1st June 2015
Several court rulings have held that demands under Section 234E cannot be enforced for returns filed before 1st June 2015, even if processed afterward. Some key cases include:
Rajesh Kourani v. UOI (Gujarat HC) – Held that prior to 1st June 2015, there was no mechanism to levy a fee under Section 234E, making such charges invalid for earlier periods.
Fatheraj Singhvi v. UOI (Karnataka HC) – Upheld that 234E is not applicable for TDS statements filed before 1st June 2015, even if processed later.
Compliance and Payment Mechanism
Checking Defaults – Deductors should review TRACES portal for any pending 234E late fee demands and clear dues before 31.03.2025 to avoid further complications.
Payment Process – The fee must be paid using challan ITNS 281 under Fee under Section 234E.
Avoiding Future Late Fees – Ensure timely TDS filings as per due dates:
Q1 (April-June) – 31st July
Q2 (July-September) – 31st October
Q3 (October-December) – 31st January
Q4 (January-March) – 31st May
Conclusion
The late filing fee under Section 234E is strictly applicable post 1st June 2015, and courts have ruled against retrospective imposition. With automated compliance checks and the deadline of 31.03.2025, it is crucial for deductors to ensure timely TDS return filing and clear any outstanding late fees to avoid unnecessary penalties and additional financial burden.
