TDS default is not one problem. It can create interest, disallowance of expense, TDS return correction work, vendor credit disputes and demand exposure. Finance teams should treat TDS as a monthly close control.
| Default | Immediate risk | Secondary risk |
|---|---|---|
| Tax not deducted | Interest and disallowance exposure. | Vendor may not get credit. |
| Tax deducted but not deposited | Interest and serious compliance escalation. | Expense disallowance and vendor dispute. |
| Wrong PAN/section/amount | Tax credit mismatch. | Correction statement and follow-up. |
| Late TDS statement | Late fee/filing issue. | Delayed credit to vendor. |
Official Income Tax Department guidance states that failure to deduct or deposit TDS can trigger interest, and Section 40(a)(ia) can result in 30% disallowance where applicable for resident payments subject to TDS and not deducted/deposited as required.
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Official guidance refers to interest consequences and possible disallowance under Section 40(a)(ia) where applicable.
That can create interest and credit problems for the deductee.
Yes, through the official TDS/TCS correction statement process.