The Finance Bill proposes to create a separate class of default in respect of tax deducted but not paid to levy interest at a higher rate of 1.5 per cent per month, i.e. 18 per cent p.a. as against 1 per cent p.m., i.e. 12 per cent p.a., applicable in case the tax is deducted late after the due date. The rationale behind this amendment is that the tax once deducted belongs to the government and the person withholding the same needs to be penalized by charging higher rate of interest.
So pay your TDS deduction on time ,otherwise you have to bear heavy interest cost.
Summary of New provision
Interest up to 30.06.2010
- For late deduction of Tax deduction at source-(rate 1 % per month or part thereof)
- For late deposit of TDS after deduction (rate 1 % per month or part thereof)
- For late deduction of Tax deduction at source-(period date from tax deductible to date of actual deduction )(rate 1 % per month or part thereof)
- For late deposit of TDS after deduction (period :date from tax deducted and date of actual deposit)(rate 1.5 % per month or part thereof)
This amendment is proposed to take effect from 1st July, 2010.
42. In section 201 of the Income-tax Act, for sub-section (1A), the following sub-section shall be substituted with effect from the 1st day of July, 2010, namely:—
“(1A) Without prejudice to the provisions of sub-section (1), if any such person, principal officer or company as is referred to in that sub-section does not deduct the whole or any part of the tax or after deducting fails to pay the tax as required by or under this Act, he or it shall be liable to pay simple interest,—
(i) at one per cent. for every month or part of a month on the amount of such tax from the date on which such tax was deductible to the date on which such tax is deducted; and
(ii) at one and one-half per cent. for every month or part of a month on the amount of such tax from the date on which such tax was deducted to the date on which such tax is actually paid, and such interest shall be paid before furnishing the statement in accordance with the provisions of sub-section (3) of section 200.”.