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India Tightens Tax Deduction Compliance Rules

by Mary Swire, Tax-News.com, Hong Kong

07 August 2013


Some of the funds collected via India's "Tax Deducted at Source" (TDS) system are not being paid to the Government, the Finance Ministry has said.

The Income Tax Department is increasingly aware that large numbers of those responsible for collecting TDS are retaining the funds for business purposes or personal use. Failure to provide the Government with this money after a payment due date is a prosecutable offence under the Income Tax Act. If convicted, a defaulter can be sentenced to "rigorous Imprisonment," for up to seven years.

The Central Board of Direct Taxes has now partially amended the existing guidelines for identifying cases in which prosecution is possible. It will no longer apply the "minimum retention period" criteria of 12 months, meaning that defaulters can be liable for prosecution irrespective of the length of time they wrongly retained the funds.

The Income Tax Department's TDS units have begun prosecution proceedings in a number of cases.

TAGS: compliance | Finance | tax | business | tax compliance | India | tax avoidance | revenue guidance | ministry of finance | tax authority | tax reform

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