Finance Bill 2025 provides relief from prosecution for late TCS payments

In a move aimed at providing relief to taxpayers, the Finance Bill 2025 has introduced a significant amendment to Section 276BB of the Income-tax Act, 1961. This amendment addresses the issue of prosecution for failure to deposit Tax Collected at Source (TCS) with the Central Government, offering taxpayers a chance to comply without facing legal consequences—if they meet certain conditions.

 

What is Section 276BB of the Income-tax Act?

Section 276BB of the Income-tax Act pertains to the prosecution of individuals or entities who fail to deposit TCS with the Central Government. Under the previous provisions, individuals who did not pay TCS as required could face rigorous imprisonment for a term ranging from three months to seven years, along with a fine.

 

The amendment in the Finance Bill 2025 provides some relief to taxpayers by offering them a second chance to comply with the tax regulations without facing such severe consequences.

 

The Key Amendment

The amended provision allows taxpayers to avoid prosecution if they deposit the TCS amount with the government before the prescribed deadline for filing the TCS statement under Section 206C(3). This deadline typically falls within the quarter following the collection of TCS.

 

This change is crucial as it grants taxpayers the opportunity to correct their payment before facing any legal action. Essentially, if TCS is deposited before the filing deadline, the person will not be prosecuted, even if the deposit was delayed.

 

However, the amendment also retains the original consequences for taxpayers who fail to make the payment after the deadline has passed. If TCS remains unpaid beyond this prescribed deadline, the prosecution provisions under Section 276BB will continue to apply, and legal action can be initiated.

 

What does this mean for the taxpayer?

This new amendment essentially offers a grace period for taxpayers who might have missed the original deadline for depositing TCS. As long as the TCS is paid before the deadline for filing the TCS statement, the taxpayer will avoid facing any legal action or prosecution.

 

This change aims to make the compliance process easier and more taxpayer-friendly, ensuring that minor lapses in payment do not result in severe legal consequences, as long as the issue is rectified within the stipulated time frame.

 

Frequently Asked Questions (FAQs)

Q1: What is Section 276BB of the Income-tax Act? 

A: Section 276BB deals with the prosecution of individuals who fail to deposit the tax collected at source to the credit of the Central Government.

 

Q2: What amendment has been made to Section 276BB in Finance Bill 2025? 

A: The amendment provides that prosecution will not be initiated if the TCS is deposited before the prescribed deadline for filing the TCS statement under Section 206C(3).

 

Q3: What happens if TCS remains unpaid after the filing deadline? 

A: If the TCS remains unpaid after the prescribed deadline, the original provisions of Section 276BB will apply, and prosecution can be initiated.

 

Q4: What relief is provided to taxpayers in the Finance Bill 2025? 

A: The amendment provides relief by offering a chance to avoid prosecution if TCS is paid to the Central Government before the deadline for filing the TCS statement.