In a stern warning, the Revenue department today said tax deductors who default in depositing TDS by due date will be liable for prosecution and can be imprisoned for up to seven years.

"It has come to the notice of Income Tax Department that many times the tax deductors, after deducting TDS from specified payments, are deliberately not depositing the taxes so deducted in government account...

"Such retention of government dues beyond the due date is an offence liable for prosecution under Section 276B of the Income Tax Act, 1961," the Central Board of Direct taxes (CBDT) said in a statement.

"The defaulter, if convicted, can be sentenced to Rigorous Imprisonment (RI) for a term which can extend up to seven years," it added.

The statement further said that the TDS units of income tax department have been taking up prosecution proceedings in cases where the tax deducted at source has been retained beyond the due date.

The CBDT has partly modified existing guidelines for identification of cases for launching prosecution.

As per the revised guidelines, the criterion of minimum retention period of 12 months has been dispensed with, the CBDT said in statement.

The department added, however, that the offence under section 276B of the Income Tax Act can be compounded by Chief Commissioner having jurisdiction on the case, either before or after the launching of prosecution proceedings.