No Extension of Due Date of TDS payment for March 2020 onwards amid COVID-19

TDS payment due date for March 2020 extended or not for COVID-19 pandemic: After the announcement of various relief measures by the Finance Minister Smt. Nirmala Sitaram to provide relaxations from certain compliances under the Income Tax Law, many queries have been raised about the extension of the due date of payment of TDS for the month of March 2020. 

The aspect of extension of due date or relief given for payment of TDS for the month of March 2020 and subsequent months has been analyzed with the provisions of Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 ("Ordinance, 2020") which is promulgated subsequent to the announcements of the relief measures by the Finance Minister.

Read the full text of the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020

On account of the complete lockdown imposed by Government all over the country in the backdrop of outbreak of pandemic COVID-19 disease, the Finance Minister Smt. Nirmala Sitaraman had announced certain relaxations to various regulatory and statutory compliances under the Direct and Indirect tax laws.

One of the announcements was related to payment of taxes including payment of TDS. In was announced that for delayed payments of advance tax, self-assessment tax,  regular tax, TDS, TCS, equalization levy, STT, CTT made between 20th March 2020 and 30th June 2020, reduced interest rate at 9% instead of 12 %/18 % per annum ( i.e. 0.75% per month instead of 1/1.5 per cent per month) will be charged for this period. No late fee/penalty shall be charged for delay relating to this period.

It was further announced that the due dates for issue of notice, intimation, notification, approval order, sanction order, filing of appeal, furnishing of return, statements, applications, reports, any other documents and time limit for completion of proceedings by the authority and any compliance by the taxpayer including investment in saving instruments or investments for rollover benefit of capital gains under Income Tax and other direct taxes laws where the time limit is expiring between 20th March 2020 to 29th June 2020 shall be extended to 30th June 2020.

Read the detailed text of relief measures announced here.

To give legal effect to the public announcements, the government has promulgated an Ordinance namely Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020.

Section 3 of the Ordinance, 2020 is the relevant provisions related to the extension of time limit to corroborating the Minister’s announcements.

Section 3(1) and section 3(2) are the relevant provisions related to the above two relief announcements regarding extension of due date in the wake of COVID-19 outbreak.

The Ordinance, 2020 has provided relief from ‘Action based compliances’ and ‘compliances with regard to tax payments’.

Section 3(1) provides for the extension of due dates for Action Based Compliances which does not involve tax payments in any form. These includes-

Issue of any notices,etc., by the income tax or other authorities,

Passing of any orders etc by the income tax or other authorities,

Completion of any proceedings, etc by the income tax or other authorities,

Filing of any application, reply, appeals,

furnishing of any report, document, return, statement or other similar records.

Investments etc. for claiming deduction under Chapter VI-A,

It must be noted that extension of due dates is not blanket for the entire financial year 2019-20. The extension of time limit or due date is provided only when the specified or prescribed or notified time limit falls in the period between March 20, 2020 and June 29, 2020 (‘specified period’). If any due date for the above-mentioned action based compliances falls in the specified period then only the due date shall get extended to the new due date of June 30, 2020.

Where any compliance is related to payment of taxes in any form then section 3(2) of the Ordinance, 2020 triggers. In that case, section 3(1) will not apply.

In the Ordinance, 2020, there is neither any express provision to restrict the due date of tax payment nor to extend the prescribed due dates of TDS or tax payments under the Income Tax Law. Since the Ordinance is a special law to override to the provisions of Income Tax Act, 1961 in order to provide relief from the compliances to the taxpayers owing to COVID-19 distress, in case there is no express provision to override any of the provisions of the Income Tax Act, the provisions as contained in the Income Tax Act, 1961 shall prevail.

Section 3(2) of the Ordinance, 2020 provides that where the due date for payment of TDS or any other taxes and levies falls in the specified period (in the period between March 20, 2020 and June 29, 2020) and not paid by the due date then such taxes and levies can be paid by June 30, 2020.

This establishes the fact that there is no extension of any due date for payment of taxes including TDS where the due date falls in the specified period. However, relaxation is given for deferment of the payment till June 30, 2020. All the consequences for delay in payment of taxes and TDS shall be applicable unless provided otherwise in the Ordinance to override the penal consequences.

However, the following reliefs have been provided by the section 3(2) in case where tax or TDS is not paid by the due date which falls in the specified period but is paid by June 30, 2020-

1. The assessee shall not be liable for the penalty for delay in the payment of taxes or TDS after the prescribed due date.

2. No prosecution shall be initiated against the assessee for delay in the payment of taxes or TDS after the prescribed due date.

3. Reduced rate of interest of 0.75% p.m. is payable by the assessee for the delay in the payment of taxes or TDS after the due date.

4. Reduction in the computation of the period for which interest is payable.

If any provision of the Ordinance, 2020 does not specifically override the due dates prescribed under the income tax law for the payment of TDS for March 2020 and subsequent months then the due dates prescribed in the Income Tax Laws shall prevail.

However, the provisions related to interest and imposition of penalty have been overwritten by the Ordinance, 2020. Hence the normal provisions of the Income Tax laws shall not apply in these cases.

Similarly, the provisions of the income tax act related to prosecution for non-payment of TDS shall not apply in these cases.

Interest liability for delay in payment of due taxes in the extended time limit

Section 3(2) of the Ordinance, 2020 prescribes for the payment of interest in case of delay in the payment of the due taxes till June 30, 2020. In this context, it must be remembered that-

1. The provision of the Ordinance, 2020 shall prevail over the provisions of the respective laws under which the tax or levy is required to be paid. The provision of the Ordinance, 2020 has the overriding effect.

2. The rate of interest chargeable for the delay in the payment of the tax or levy is reduced to 0.75 per cent for every month or part thereof in all cases. Remember, the rate of interest is reduced and not the amount of interest. 

In most cases under the Income Tax Act, 1961 the rate of interest prescribed is 1%. Hence, in those cases, there is a waiver of 25 per cent of the interest liability for the delay in the payment of the due taxes and levy.

However, in case of delay in deposit of TDS where tax is deducted, the rate of interest is 1.5% for every month or part thereof. In this case, the waiver in the rate of interest is 50%.

One may argue that why one should pay the interest even at a reduced rate when there is a delay for no fault of the assessee. This is a point of debate but here I am discussing the provision that is provided in the Ordinance, 2020.

3. As per the Ordinance, 2020, the period of interest shall be computed from the due date till the date of payment. This period is termed as 'period of delay' in the Ordinance, 2020. Even if the respective laws provide otherwise to compute the interest otherwise, the same shall be ignored and shall be computed from the due date of payment of taxes till the date of actual payment of the taxes or levy.

As per the Ordinance,2020, the "period of delay" means the period between the due date and the date on which the amount has been paid.

The reduced rate of interest is specified for every month or part thereof which means any part of a month is taken as a full month.

To explain the provision of interest computation let us take the example of payment of TDS under the Income Tax Act, 1961. Suppose, an assessee has deducted TDS on interest payment of Rs. 1,00,000 u/s 194A on 10th March, 2020. The amount of TDS comes to Rs. 10,000 at the prescribed rate of TDS of 10%.

The normal due date to pay the liability of TDS in the month of March is April, 30, 2020 which falls between March 20 to June 29. In normal circumstances, if the TDS is paid on May 20, 2020 then the deductor has to pay interest @ 1.5 % from March 2020 to May 2020 or 3 months. Thus the total interest comes to Rs. 450. Further, the deductor is subject to penal and prosecution provisions.

Under the amended provisions, the rate of interest shall be reduced to 0.75% (instead of 1.50%) for every month or part thereof and shall be computed between April 30 and May 20. Hence, the interest is computed for 2 months for April 2020 and May 2020. The amount of interest payable on delay payment of TDS of Rs. 10,000 comes to Rs. 150. Further, the deductor is given immunity from penal and prosecution provisions.

A Clarification required on the computation of the period of delay:

The period of delay is defined as the period between the due date and the date on which the amount has been paid. Hence, whether the period of delay is counted from the due date or the date immediately after the due date. This is important because a single day of a month will be counted as one full month.

In the example given above, if the period of delay is counted from the due date i.e. April 30, the period of delay comes to 2 months as computed in the given example. But if the period of delay is counted from the next day of the due date i.e. May 1 then the period of delay will be 1 month only. Hence, CBDT should clarify the date from which the computation of the period of delay shall be reckoned.

4. The provisions of reduced rate of interest and the immunity from penalty and provision are applicable only where the due date of tax payment falls between March 20 and June 29, 2020. In case the due date falls outside this period then there will be no benefit under this Ordinance,2020 and the full rate of interest and penal and prosecution provisions under the respective laws shall apply.

Suppose, the TDS of February 2020 remains unpaid by March 7, 2020 (due date). The deductor must have planned to pay by March 31 (and assuming he had valid reasonable cause for the delay). But due to the lockdown situation, he cannot pay by March 31 and finally pays on June 30, 2020. He will not get any immunity under the Ordinance, 2020 and the normal provisions of the Income Tax Act shall apply to him for such delay. In this case, he has to pay interest @ 1.5% from February 2020 to June 2020.

Actually in such a case also the period from March 20 till the lockdown continues shall be excluded from computing the periods of delay. It is requested to the government to look in the matter and shall issue an appropriate notification or carry out a suitable amendment to exclude the period of lockdown from the computation of interest payable.

All Compliances for March 2020 TDS falling on one day - June 30, 2020

Business houses may find it difficult to pay the TDS by the respective due dates due to ongoing lockdown for containment of the spread of coronavirus in the country. Even after the lifting of lockdown, it will take time to settle and return to normalcy. The due date for TDS for March 2020 is April, 30, 2020. Suppose an assessee could not pay the TDS of March, 2020 by April 30, 2020 but decides to pay on June 30, 2020. Then all the related compliances (action-based compliances) to the TDS for the month of March 2020 also falls on the same day as table below-

Actions	Nature of Compliance	Date of Performance
Payment of TDS for March, 2020	Assume paid by the assessee on	June 30, 2020
Filing of TDS Return for 4th Quarter, ending on March 2020	TDS Return	June 30, 2020
Issue of TDS Certificates for the fourth quarter of 2019-20	TDS Certificates	June 30, 2020

From the above table, it can be seen that all the dates coincide on one day. Hence one needs proper planning so that all the compliances can be completed by June 30, 2020.

It requires payment of TDS at least by 10 to 12 days prior to June 30, 2020. Once the payment is made, it takes 2 to 3 working days to get reflected on the NSDL database from the bank’s server. Further, after filing of TDS return, it takes 5 to 7 days to process the TDS Return by the CPC. Once the TDS return is processed, TDS certificates can be generated from the TRACES portal.

Certain compliance for TDS payment and interest and other actions are listed in the table below-

TDS Compliances from March 2020 to May 2020	Normal Due Dates/Interest Rate	Extended Due Dates
TDS payment  Compliances
March 2020	30-04-2020	30-06-2020 (But can be paid till June 30, 2020 without any penal Consequences)
April 2020	07-05-2020	30-06-2020 (But can be paid till June 30, 2020 without any penal Consequences)
May 2020	07-06-2020	30-06-2020 (But can be paid till June 30, 2020 without any penal Consequences)
Interest for delayed payment of TDS and if paid by June 30, 2020
March 2020	1.5% p.m.	0.75% p.m.
April 2020	1.5% p.m.	0.75% p.m.
May 2020	1.5% p.m.	0.75% p.m.
Action based Compliances
Filing of TDS Returns (24Q for Salary TDS 26Q for Non Salary TDS 27Q for Non Resident)	31-05-2020	30-06-2020
Issue of TDS Certificates (Form 16 for Salary TDS for FY 2019-20 Form 16A for Non Salary TDS for Q-4 of FY 2019-20)	15-06-2020	30-06-2020

In this context, it is to be noted that the date of June 29, 2020 and June 30, 2020 is not made static but a dynamic one. It means these dates may be further extended by the government depending upon the situation of the country at that point of time. However, these dates can only be extended by the notification and cannot be reduced.

From the bare reading of the provisions, it appears that the new time limit is set keeping in mind the lockdown time limit of April 14, 2020. In case the lockdown amid COVID-19 threat is extended further, the government will further extend the time limit and that is why June 29/30, 2020 is kept as a variable or dynamic date and not a static one.

Read more on the extension of due dates and many other TDS related compliances:

Analysis of New Extended Due Dates for Compliances and Investmentsunder Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance,2020

Significance of extension or non-extension of due dates

In a case where the due date is extended then the old due date is reset with the new due date and all the non-compliances or default shall be counted from the new due date. For example, in case of filing of TDS return and issue of TDS certificates, the due date is extended to June 30, 2020. Hence, the old due date of May 31, 2020 and June 15, 2020 respectively is overwritten with the new due date of June 30, 2020.

If the assessee fails to file the e-tds return by June 30, 2020 then the late fees of Rs. 200 per day for each day of default shall be counted from July 1, 2020 onwards.

Similarly, where there is a delay in issue of TDS certificates, the penalty of Rs. 100 per day for each day of delay shall be applicable from July 1, 2020.

On the other hand, there is no extension of the due date of payment of TDS for the month of March 2020 and others. In this case, the immunity given from non-imposition of the penalty and non-initiation of prosecution will be withdrawn if the assessee fails to pay the due TDS by June 30. Since there is no extension of the due date, the normal rate of interest shall apply even for the specified period if paid on or after July 1, 2020. (unless June 29/30 is extended further).

Staggered Compliances

Section 3(1) and section 3(2) are two mutually exclusive provisions. Hence non-compliances under one provision do not affect compliances or non-compliances under the other provision. Both sections operate independently.

If payment is made by June 30 but the return is filed after that date- Only consequences follow for the delay in filing of return which is a payment of late fees of Rs. 200 per day u/s 234E of the Income Tax Act, 1961.

If payment is made by June 30 and return is also filed by June 30 but TDS certificate is issued after June 30, 2020-  In this case, the penalty for delay in issue of TDS certificate shall apply which is Rs 100 per day for each day of default u/s 272A of the Income Tax Act, 1961.

Remember, if the payment of TDS is made after June 30, 2020 then the immunity given for penalty and prosecution and the relaxation in the rate of interest and reduction in the period for which interest will be charged shall not be available. All the normal provisions shall apply to the assessee. Interest shall be payable from March to July (if paid in July) @ 1.5% p.m. Further, the assessee is subject to penalty and prosecution provisions.

Comparative study of Interest Payable for the delay in deposit of TDS

Statement showing the comparative amount of interest payable under normal provisions of the Income Tax and after the relaxation given in the Ordinance, 2020

Example: Suppose TDS of Rs. 10,000 is made in April 2020. The due date to pay the TDS is May 7, 2020. However, the TDS is actually paid on June 25, 2020.

The interest liability under the normal provisions and the special provisions is computed below-

Particulars	Normal Provisions	Special Provisions
Amount of TDS	Rs. 10,000	Rs. 10,000
Rate of Interest	1.5% p.m.	0.75% p.m.
Period of Interest	From April 2020 to June 2020	From May 2020 to June 2020
Relevant Provisions	Sec 201(1A)(ii) of the Income Tax Act, 1961	Section 3(2) of the relief Ordinance, 2020
Amount of Interest	Rs. 450 [(Rs. 10,000 x 1.5% x 3m)]	Rs. 150 [(Rs. 10,000 x 0.75% x 2m)]

In normal circumstances, the assessee might have paid the TDS by the due date and hence no interest would have been paid by the assessee. However, this aspect is ignored in this example.

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