Swiggy Receives Tax Demand Notice for TDS Non-Compliance

Swiggy Receives Tax Demand Notice for TDS Non-Compliance. The Indian tax system has become more severe with every passing year, especially when it comes to the enforcement of Tax Deducted at Source (TDS) regulations. A recent development has brought this issue to the spotlight once again. Swiggy Limited, one of India's leading food delivery platforms, has received a tax demand notice from the Income Tax Department due to non-compliance with TDS rules for the financial year 2017-18. The incident sheds light on how important it is for businesses to maintain proper compliance with tax laws, particularly TDS provisions under the Income Tax Act, 1961.
In this article, we will discuss the complete background of the notice issued to Swiggy, know the reasons behind the non-compliance, break down the penalties involved, and explain the significance of complying with TDS regulations.
Tax Demand Notice Issued by the Income Tax Department
Swiggy Limited received a tax demand notice from the TDS Circle of the Income Tax Department in Bangalore. The notice pertains to the financial year 2017-18 and is related to a failure to deduct TDS under Section 194C of the Income Tax Act. This section mandates that any person making payment to a contractor for carrying out any work under a contract must deduct tax at source at the specified rate before making the payment.
In this case, Swiggy reportedly made payments to merchants in the form of cancellation charges. According to the tax department, these payments were in the nature of contractual payments and should have been subjected to TDS under Section 194C. Swiggy allegedly failed to deduct the applicable TDS on these payments, thereby attracting legal consequences.
Tax Liability and Interest Details
The Deputy Commissioner of Income Tax has issued a tax demand totaling Rs.98.91 lakh. This includes Rs.53.47 lakh as the principal tax amount and Rs.45.44 lakh as interest. The interest component has been levied for the delay in deduction and payment of TDS.
The tax authorities maintain that Swiggy was under an obligation to deduct TDS on the cancellation charges paid to the merchants. Since this obligation was not fulfilled, the liability has now been raised along with the applicable interest as per the provisions of the Income Tax Act.
This situation highlights how non-compliance with tax deduction norms, even if unintentional or due to misinterpretation of law, can lead to substantial financial liabilities and increased scrutiny from tax authorities.
What is TDS (Tax Deducted at Source)?
Tax Deducted at Source (TDS) is a tax collection mechanism under the Income Tax Act, 1961. It aims to collect tax from the very source of income. When a person (known as the deductor) is making a payment that falls under the purview of TDS, they are required to deduct a specified percentage of tax before transferring the payment to the recipient (known as the deductee). This deducted tax is then deposited with the government.
TDS applies to various types of payments such as salaries, professional fees, contractor payments, rent, commissions, interest, and more. The objective is to ensure a continuous inflow of revenue to the government and to minimize tax evasion.
Moreover, the deductor must file TDS returns at regular intervals, reporting the details of the tax deducted and deposited. These returns also reflect in the income tax records of the deductees, helping them claim credit for the tax deducted.
Importance of TDS Compliance
TDS compliance is not just a procedural requirement—it plays an important role in a business’s overall financial and legal health. Here’s why adhering to TDS provisions is essential:
Legal Requirement
TDS compliance is mandated by law. Any non-compliance can attract legal actions including penalties, interest charges, prosecution, and disallowance of expenditure. In the case of Swiggy, the failure to comply with TDS provisions resulted in a significant demand notice, which could have been avoided through proper tax management.
Smooth Financial Operations
Timely deduction and deposit of TDS make sure that a business doesn’t accumulate tax liabilities unknowingly. It allows for better cash flow planning and helps avoid unexpected financial burdens due to penalties and interest. Non-compliance can also result in disallowance of expenses, impacting the company’s profitability and tax liability.
Ensures Transparency
When a business deducts and deposits TDS correctly, the transaction is reported to the government, and a record is created in the tax database. This promotes transparency and simplifies the process of income assessment. It also builds credibility during audits and reduces the chances of litigation.
Improves Credibility
Compliance with TDS provisions shows that a business is committed to ethical practices and responsible financial conduct. This builds trust with clients, vendors, regulatory authorities, and even investors. Companies that adhere to tax norms are less likely to face scrutiny or penalties, which in turn strengthens their reputation in the market.
Due Dates for TDS Payment and Return Filing
Knowing the due dates for TDS payments and return filing is essential for staying compliant. Missing these deadlines can result in hefty penalties and interest charges.
TDS Payment Due Dates
• For most months: TDS must be deposited with the government by the 7th of the following month in which the tax was deducted.
• For TDS deducted in March:

Non-government deductors: On or before April 30.

Government deductors: On or before March 31.

TDS Return Filing Due Dates

Quarter
Period
Due Date

Q1
April – June
31st July

Q2 
July – September
31st October

Q3
October – December
31st January

Q4 
January – March
31st May

Penalties for TDS Non-Compliance
The Income Tax Act imposes strict penalties for TDS non-compliance. These penalties apply in different scenarios and can cumulatively result in significant financial liability.
1. Interest on Late Deduction
If TDS is not deducted on time, interest at the rate of 1% per month or part of the month is levied from the date the tax was deductible to the actual date of deduction.
2. Interest on Late Payment
If TDS is deducted but not deposited within the due date, interest at 1.5% per month or part thereof is charged from the date of deduction till the date of deposit.
3. Late Filing Fee
Under Section 234E of the Income Tax Act, a late filing fee of Rs.200 per day is levied for delay in filing the TDS return. This fee continues until the return is filed but is capped at the total amount of TDS deducted.
4. Penalty Equal to the TDS Amount
The Assessing Officer may levy a penalty equal to the amount of tax that was either not deducted or not deposited as per Section 271C of the Income Tax Act.
These penalties not only result in a financial hit but also create compliance risks for businesses.
How Can Compliance Calendar Help Avoid Penalties?
To avoid facing such financial and legal troubles, businesses must seek professional help in managing their TDS obligations. Compliance Calendar is one such organization that provides end-to-end TDS compliance solutions tailored to the needs of businesses of all sizes.
Here’s how Compliance Calendar can support your organization:
Accurate TDS Deduction and Payment
Compliance Calendar ensures that TDS is accurately calculated and deducted based on the nature of the transaction and the applicable section under the Income Tax Act. Their experts help businesses avoid errors in tax deduction and ensure timely deposit of the tax with the government.
Timely and Error-Free TDS Return Filing
Compliance Calendar offers quarterly TDS return filing services to ensure all information is submitted to the tax authorities in a timely and accurate manner. Their team takes care of data validation and reconciliation before filing the returns, reducing the chances of notices from the department.
Compliance Monitoring and Notifications
Missing deadlines is one of the most common reasons for penalties. Compliance Calendar tracks all due dates for TDS payments and return filings and notifies clients well in advance. This helps businesses stay ahead of compliance requirements and avoid last-minute hassles.
Legal Assistance for Tax Notices
In case a business receives a tax notice, such as the one issued to Swiggy, Compliance Calendar’s experts step in to analyze the situation and provide appropriate responses. They offer representation services and assist in preparing replies, appeals, or revised returns as required.
You can connect with Compliance Calendar experts through mail info@ccoffice.in or Call/Whatsapp at +91 9988424211.

The Indian tax system has become more severe with every passing year, especially when it comes to the enforcement of Tax Deducted at Source (TDS) regulations. A recent development has brought this issue to the spotlight once again. Swiggy Limited, one of India's leading food delivery platforms, has received a tax demand notice from the Income Tax Department due to non-compliance with TDS rules for the financial year 2017-18. The incident sheds light on how important it is for businesses to maintain proper compliance with tax laws, particularly TDS provisions under the Income Tax Act, 1961.

In this article, we will discuss the complete background of the notice issued to Swiggy, know the reasons behind the non-compliance, break down the penalties involved, and explain the significance of complying with TDS regulations.

Tax Demand Notice Issued by the Income Tax Department

Swiggy Limited received a tax demand notice from the TDS Circle of the Income Tax Department in Bangalore. The notice pertains to the financial year 2017-18 and is related to a failure to deduct TDS under Section 194C of the Income Tax Act. This section mandates that any person making payment to a contractor for carrying out any work under a contract must deduct tax at source at the specified rate before making the payment.

In this case, Swiggy reportedly made payments to merchants in the form of cancellation charges. According to the tax department, these payments were in the nature of contractual payments and should have been subjected to TDS under Section 194C. Swiggy allegedly failed to deduct the applicable TDS on these payments, thereby attracting legal consequences.

Tax Liability and Interest Details

The Deputy Commissioner of Income Tax has issued a tax demand totaling Rs.98.91 lakh. This includes Rs.53.47 lakh as the principal tax amount and Rs.45.44 lakh as interest. The interest component has been levied for the delay in deduction and payment of TDS.

The tax authorities maintain that Swiggy was under an obligation to deduct TDS on the cancellation charges paid to the merchants. Since this obligation was not fulfilled, the liability has now been raised along with the applicable interest as per the provisions of the Income Tax Act.

This situation highlights how non-compliance with tax deduction norms, even if unintentional or due to misinterpretation of law, can lead to substantial financial liabilities and increased scrutiny from tax authorities.

What is TDS (Tax Deducted at Source)?

Tax Deducted at Source (TDS) is a tax collection mechanism under the Income Tax Act, 1961. It aims to collect tax from the very source of income. When a person (known as the deductor) is making a payment that falls under the purview of TDS, they are required to deduct a specified percentage of tax before transferring the payment to the recipient (known as the deductee). This deducted tax is then deposited with the government.

TDS applies to various types of payments such as salaries, professional fees, contractor payments, rent, commissions, interest, and more. The objective is to ensure a continuous inflow of revenue to the government and to minimize tax evasion.

Moreover, the deductor must file TDS returns at regular intervals, reporting the details of the tax deducted and deposited. These returns also reflect in the income tax records of the deductees, helping them claim credit for the tax deducted.

Importance of TDS Compliance

TDS compliance is not just a procedural requirement—it plays an important role in a business’s overall financial and legal health. Here’s why adhering to TDS provisions is essential:

Legal Requirement

TDS compliance is mandated by law. Any non-compliance can attract legal actions including penalties, interest charges, prosecution, and disallowance of expenditure. In the case of Swiggy, the failure to comply with TDS provisions resulted in a significant demand notice, which could have been avoided through proper tax management.

Smooth Financial Operations

Timely deduction and deposit of TDS make sure that a business doesn’t accumulate tax liabilities unknowingly. It allows for better cash flow planning and helps avoid unexpected financial burdens due to penalties and interest. Non-compliance can also result in disallowance of expenses, impacting the company’s profitability and tax liability.

Ensures Transparency

When a business deducts and deposits TDS correctly, the transaction is reported to the government, and a record is created in the tax database. This promotes transparency and simplifies the process of income assessment. It also builds credibility during audits and reduces the chances of litigation.

Improves Credibility

Compliance with TDS provisions shows that a business is committed to ethical practices and responsible financial conduct. This builds trust with clients, vendors, regulatory authorities, and even investors. Companies that adhere to tax norms are less likely to face scrutiny or penalties, which in turn strengthens their reputation in the market.

Due Dates for TDS Payment and Return Filing

Knowing the due dates for TDS payments and return filing is essential for staying compliant. Missing these deadlines can result in hefty penalties and interest charges.

TDS Payment Due Dates

• For most months: TDS must be deposited with the government by the 7th of the following month in which the tax was deducted.

• For TDS deducted in March:

Non-government deductors: On or before April 30.
Government deductors: On or before March 31.

TDS Return Filing Due Dates

Quarter	Period	Due Date
Q1	April – June	31st July
Q2	July – September	31st October
Q3	October – December	31st January
Q4	January – March	31st May

Penalties for TDS Non-Compliance

The Income Tax Act imposes strict penalties for TDS non-compliance. These penalties apply in different scenarios and can cumulatively result in significant financial liability.

1. Interest on Late Deduction

If TDS is not deducted on time, interest at the rate of 1% per month or part of the month is levied from the date the tax was deductible to the actual date of deduction.

2. Interest on Late Payment

If TDS is deducted but not deposited within the due date, interest at 1.5% per month or part thereof is charged from the date of deduction till the date of deposit.

3. Late Filing Fee

Under Section 234E of the Income Tax Act, a late filing fee of Rs.200 per day is levied for delay in filing the TDS return. This fee continues until the return is filed but is capped at the total amount of TDS deducted.

4. Penalty Equal to the TDS Amount

The Assessing Officer may levy a penalty equal to the amount of tax that was either not deducted or not deposited as per Section 271C of the Income Tax Act.

These penalties not only result in a financial hit but also create compliance risks for businesses.

How Can Compliance Calendar Help Avoid Penalties?

To avoid facing such financial and legal troubles, businesses must seek professional help in managing their TDS obligations. Compliance Calendar is one such organization that provides end-to-end TDS compliance solutions tailored to the needs of businesses of all sizes.

Here’s how Compliance Calendar can support your organization:

Accurate TDS Deduction and Payment

Compliance Calendar ensures that TDS is accurately calculated and deducted based on the nature of the transaction and the applicable section under the Income Tax Act. Their experts help businesses avoid errors in tax deduction and ensure timely deposit of the tax with the government.

Timely and Error-Free TDS Return Filing

Compliance Calendar offers quarterly TDS return filing services to ensure all information is submitted to the tax authorities in a timely and accurate manner. Their team takes care of data validation and reconciliation before filing the returns, reducing the chances of notices from the department.

Compliance Monitoring and Notifications

Missing deadlines is one of the most common reasons for penalties. Compliance Calendar tracks all due dates for TDS payments and return filings and notifies clients well in advance. This helps businesses stay ahead of compliance requirements and avoid last-minute hassles.

Legal Assistance for Tax Notices

In case a business receives a tax notice, such as the one issued to Swiggy, Compliance Calendar’s experts step in to analyze the situation and provide appropriate responses. They offer representation services and assist in preparing replies, appeals, or revised returns as required.

You can connect with Compliance Calendar experts through mail info@ccoffice.in or Call/Whatsapp at +91 9988424211.