How to calculate the interest on late payment of tds

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

29 October 2012 Sir

How to calculate the Interest rate on late payment of TDs Payment.

exp. Due Date 07.05.2010 but tds deposited on 15.12.11 so how calculate the interest & what is the rate for that

CA.Sourabh Sethia

CA.Sourabh Sethia (Expert)
Follow

29 October 2012 The information for the above is incomplete since for the above purpose date of deduction is required

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
Follow

28 July 2024 To calculate interest on late payment of TDS (Tax Deducted at Source) in India, follow the guidelines provided by the Income Tax Act. The interest is calculated based on the number of days of delay and is charged at a specific rate. Here’s how to calculate it:

### **Interest Calculation Steps:**

1. **Determine the Due Date:**
- For the given example, the due date is 07.05.2010.

2. **Determine the Actual Payment Date:**
- In this case, the TDS was deposited on 15.12.2011.

3. **Calculate the Number of Days of Delay:**
- Calculate the number of days from the due date to the actual payment date.

4. **Determine the Rate of Interest:**
- For TDS, the interest rates are as follows:
- **1% per month or part of a month** for late deposit of TDS (for both regular and advance payments).

5. **Calculate the Interest:**
- Interest is calculated on a monthly basis or part thereof.

### **Example Calculation:**

- **Due Date:** 07.05.2010
- **Actual Payment Date:** 15.12.2011

**1. Calculate the Number of Months and Days of Delay:**

- From 07.MAY.2010 to 07.MAY.2011 = 12 months
- From 07.MAY.2011 to 15.DEC.2011 = 7 months and 8 days

Total delay = 12 months + 7 months = 19 months and 8 days

Since interest is calculated on a monthly basis or part thereof, round up the days to the next month.

- **Total Delay for Interest Calculation:** 20 months

**2. Determine the Rate of Interest:**

- **Rate of Interest:** 1% per month or part of a month

**3. Calculate Interest:**

Assuming the TDS amount is ₹10K for calculation purposes:

**Interest Calculation:**

- **Interest = TDS Amount × Interest Rate × Number of Months of Delay**
- **Interest = ₹10K × 1% × 20**
- **Interest = ₹10K × 0.01 × 20**
- **Interest = ₹2K**

### **Summary:**

- **Due Date:** 07.05.2010
- **Payment Date:** 15.12.2011
- **Delay:** 20 months (rounding up to the next month)
- **Interest Rate:** 1% per month
- **Interest Amount (for ₹10K TDS):** ₹2,000

### **Points to Remember:**

- **Interest is calculated for every month or part of a month** until the actual date of payment.
- **Ensure to pay the calculated interest along with the TDS payment** to avoid further penalties or legal issues.
- **Record and report the interest paid** while filing the TDS returns for accurate compliance.

Always ensure to consult with a tax professional or refer to the latest guidelines issued by the Income Tax Department for the most accurate calculations.

Upgrade to CAclubindia Pro. Subscribe Now!