Penalties Section 271C — Penalty for Failure to Deduct or Pay TDS
Section 271C — Penalty for Failure to Deduct or Pay TDS
Income Tax Act 1961 — 271C
The Penalty
Equal to TDS amount not deducted / not paid
- Cap
- None
- Calculation base
- TDS that was required to be deducted (or deducted but not deposited) under ss.192–196D
- Period
- One-time penalty; separate for each assessment year
When does this apply?
TDS not deducted when required, OR TDS deducted but not paid to Central Government
Calculate this amount
This estimate applies only the rate and caps published in the authored rule for this page.
Worked examples
| Scenario | Calculation | Result |
|---|---|---|
| Failed to deduct TDS of ₹1,50,000 on contractor payment | Penalty = ₹1,50,000 (equal to TDS that should have been deducted) | ₹1,50,000 |
| TDS of ₹80,000 deducted but not deposited | Penalty = ₹80,000 | ₹80,000 |
How it is levied
AO (TDS) issues show-cause notice. Penalty is discretionary (AO must be satisfied there is failure). Appeals to CIT(A).
Whether s.271C penalty is mandatory or discretionary — the Supreme Court in M/s Hindustan Coca Cola Beverages (2007) held that s.271C penalty is mandatory once a default is proved, but later cases have allowed AO discretion in genuine cases. Confirm current position with a tax lawyer before assuming the penalty will always be levied.