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Interest on late payment of tds

Harikrushna jajal (Accountant) (108 Points)

10 October 2016

I have deducted the TDS amounting RS. 1,11,410/- on employee salary on 30/09/2016. I am making the payment of TDS after due date i.e. after 07/10/2016. Please let me know that Interest on late payment of TDS is applicable for 2 months or 1 month?

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8 Replies

CA Gyati Gupta (In Practice) (8427 Points)
Replied 11 October 2016

Interest on late deposit of TDS would be calculated from the date when the TDS is deducted i.e. from 30/09/2016.

Thus, Interest will be calculated u/s 201(1A) for one month @ 1.5% on amount of such tax from the date on which such tax was deducted to the date on which such tax is actually paid.

Thanks and Regards

Gyati

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Mukesh Kumar (Accounts Manager) (1466 Points)
Replied 11 October 2016

AGREE WITH GYATY BUT SIR PLEASE TELL ME DEPOSITED DATE OF TDS

chetan khanna (CS) (21 Points)
Replied 11 October 2016

Penalty of 200 per day is also applicable.

Pratik Mahajan (M.Com, CS, CA - Final) (7 Points)
Replied 11 October 2016

Agree with the views mentioned above. Interest @ 1.5% for a month provided the TDS is deposited to the credit of central government within one month (i.e. on or before 29/10/2016) from the date of deduction.

Mukesh Kumar (Accounts Manager) (1466 Points)
Replied 12 October 2016

Penalty Rs 200 per day is not applicable against deposit tds after due date

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DEVENDER KUMAR (ACCOUNTS AND TAXATION) (35 Points)
Replied 10 February 2017

In case the assessee deposits the TDS Payment after the due date of payment of the tax deducted at source, he shall be liable to pay interest @ 1.5% for every month or every part of the month during which the amount is not deposited with the government.

Earlier, the Interest liable to be paid was 1% but this has been increased to 1.5% pm with a view to discourage the practice of delaying the deposit of tax after deduction.

Interest @ 1.5% is liable to be paid from the date on which the TDS was deducted and not from the date the TDS was due.

For example: TDS was deducted on 25th June and the due date for TDS Payment was 7th July. The assessee fails to deposit the TDS by 7th July. In such a case, the Interest would be calculated from 25th June and not from 7th June.

The interest is to be calculated as per illustrations below:

Case 1:

Tax Deducted on 26th June, TDS deposited on 9th July (due date was 7th July)

The period of 26th June to 30th June will be calculated as one month (being part of a month) & from 1st July to 9th July will also be treated as one month. As such in this case, the interest payable is for two months. Total interest would be 3%. Sounds odd, but it is true – for a delay of 2 days, one has to pay interest for two months.

Case 2:

Tax Deducted on 20th March, TDS deposited on 5th May (due date was 30th April)

The period of 20th March to 31st March will be calculated as one month, 1st April to 30th April will be another month & from 1st May to 5th May will be treated as another one month. As such in this case, the interest payable is for three months. Total interest would be 4.5%. For a 5 day delay, the interest payable is for 3 months.

Logic behind this calculation is that, if dues are not paid on time, the interest for each month (or part thereof) is to be paid right from the date of deduction till date of deposit of the TDS. Each month is treated based on the ‘Calendar Month’ instead of counting the number of days.

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