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Interet calculation on late payment of tds ?

24 February 2012

Suppose I have deducted TDS of Rs 10000 on 14/4/2010 and I have paid the same on 12/7/2010. Now in this case how interest is to be calculated on late payment of TDS . Also how many months of delay will be there upto 30/6/2010 and after 30/6/2010. Actually the issue is if we count days from 12/7/2010 to 14/4/2010 then total days come to 89 days but if we calculate the days from 30/6/2010 to 14/4/2010 then it comes to 77 days and thus now i am confused that interest will be calculated at 1% for 3 months or at 1% for 2 months and 1.5% for one month.........Please also do give refernce of a circular/provision if any

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32 Replies

CA SUMANTH (LEARNER.....) (294 Points)
Replied 24 February 2012

Its 1.5% for 3 month. it was suppose to be paid on 7th may not paid so interest for may , june , july months.

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Sivaguru SM (Tax Consultant) (235 Points)
Replied 24 February 2012

It has to be considered from 07-05-2010 to 12-07-2010 i.e., 66 days rate of Int @ 18% pa

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)

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

CA VISHAL L KHATRI (PRACTICING CA) (123 Points)
Replied 24 February 2012

1.5 % for 4 months I.e 10000*1.5%*4 . dont go in days ... its moth of part of moth considered as full month.........Rs. 600 would b interest on late tax deposited.

CA Navin Jain (MANAGER (FINANCE & ACCOUNTS)) (11768 Points)
Replied 24 February 2012

In Your case Interest laiability on tds will be arised @ 1% for three month upto 30.06.2010 and @ 1.5% for one month of the july month only.

Interest is not calculated on day basis , its calculated on month or part of the month basis.

Thanks.

CA SUMANTH (LEARNER.....) (294 Points)
Replied 24 February 2012

I think Sivaguru SM is right, on reading the following, interest shall be caclculated on day basis,

Section 201. CONSEQUENCES OF FAILURE TO DEDUCT OR PAY.

(1) If any such person and in the cases referred to in section 194, the principal officer and the company of which he is the principal officer does not deduct or after deducting fails to pay the tax as required by or under this Act, he or it shall, without prejudice to any other consequences which he or it may incur, be deemed to be an assessee in default in respect of the tax :

Provided that no penalty shall be charged under section 221 from such person, principal officer or company unless the Assessing Officer is satisfied that such person or principal officer or company, as the case may be, has without good and sufficient reasons failed to deduct and pay the tax.

(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 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 at eighteen per cent per annum on the amount of such tax from the date on which such tax was deductible to the date on which such tax is actually paid.

(2) Where the tax has not been paid as aforesaid after it is deducted, the amount of the tax together with the amount of simple interest thereon referred to in sub-section (1A) shall be a charge upon all the assets of the person, or the company, as the case may be, referred to in sub-section (1).

Link:https://www.vakilno1.com/bareacts/incometaxact/s201.htm

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CA Rohit (In Practice) (71 Points)
Replied 24 February 2012

Interest will be payable for the 3 moths i.e.

1) For May @ 1% pm

2) For June @ 1% pm

3)For July @ 1.5% pm.

Ashish (XYZ) (86 Points)
Replied 24 February 2012

Hi Shivguru

You have mentioned that

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)"

Don't you think that this should be statutory date of deposit of TDS (7th May in this case) to the date of actual deposit of tax.

CA Navin Jain (MANAGER (FINANCE & ACCOUNTS)) (11768 Points)
Replied 24 February 2012

Before giving the replay should be cleraed to law

SECTION 201(1A) — Failure to deduct whole or any part of tax deducted at source or failure to deposit tax deducted at source THEN

w.e.f. 1-7-2010

If Tax is not deducted

(a) from the date of tax deductible to the date of deduction interest payable will be one per cent per month or part of month.

(b) from the date of deduction of TDS to the date of deposit/Payment of TDS Interest Payable will be one and half per cent per month or part of month.

Sivaguru SM (Tax Consultant) (235 Points)
Replied 24 February 2012

Mr. Ashish did y

SECTION 201(1A) — Failure to deduct whole or any part of tax deducted at source or failure to deposit tax deducted at source THEN

w.e.f. 1-7-2010

If Tax is not deducted

(a) from the date of tax deductible to the date of deduction interest payable will be one per cent per month or part of month.

(b) from the date of deduction of TDS to the date of deposit/Payment of TDS Interest Payable will be one and half per cent per month or part of month.

ou get answer from Mr.CA Navin Jan

Neerav Karia (Article Assistant ) (68 Points)
Replied 24 February 2012

Interest will be payable for 3 months...

If u miss the due date (here,7th may,2010) the calculation of month or part of the month begins from the date of deduction(here,14th April,2010)....one month gets over on 14th may...2 months get over on 14th june and 3 months get over on 14th July...here the payment is made before 14th July but after 14th June,so interest will be levied for 3 months duration.

The interest rate before 1st July,2010 for late payment of tax was 1 % so interest rate for 2 months will be @ 1% each and thereafter 1.5% for one month....which aggregates to 3.5% interest in ur case...

Regards :)

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Ramanuj (Accountant.) (834 Points)
Replied 24 February 2012

Interest will be payable for the 3 months i.e. 89 Days

14.04.2010 TO 13.05.2010 @ 1% P.M.

14.05.2010 TO 13.06.2010 @ 1% P.M.

14.06.2010 TO 12.07.2010 % 1.5% P. M.

10000 @ 3.5% = Rs. 350 Delays interest

Becouse if TDS not deposit on before due date then interest will be applicable on bill Date.

Thanks

Ramanuj

CA.Varalakshmi.M (Manager-Finance) (482 Points)
Replied 24 February 2012

As Vishal said, it is 4 months @ 1.5% per month -600/-

Kanwal_no1 (CA Practice ) (44 Points)
Replied 24 February 2012

Hello Dear,

Interest is payable from the Date of tax deductible (14.04.2010 in yours Case) to the date on which it is actually paid (12.07.2010 in yours case).

Interest from 14.04.2010 to 30.06.2010 - 3 months (any part of a month is taken as a month) @ 1%

01.07.2010 to 11.07.2010 - 1 Month @ 1.50%

But in yours case the Total Time period is Less that 3 Months, so the maximum interest that needs to be paid is @ 1% for 2 months - Rs. 200 and @ 1.50% for 1 months - Rs. 150 = Total Rs. 350

That is how the department is calculating interest on late payment of TDS these days. But in no case they can demand Interest for 4 months. But if you want to be sure, just ask for a frest default file generation from NSDL and then check the amount of interest there. It would be nice if you can share the results with us.

Regards

CA Kanwaljit Singh Dhunna

1 Like

Ramya (Internal Audit) (59 Points)
Replied 25 February 2012

I totally agree with CA Kanwal except the conclusion. Wat is the reason for finally calculating it for two months i.e for the period 14.04.10-30.06.10?