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TDS Related Doubt

sssvkSridharan R. (CA (Final) Salem. Tamilnadu. sssvksridhar@yahoo.co.in) (218 Points)

16 May 2011

Dear Colleages,

While calculating interest under section 201(1A), to how many digits should we round off the TDS amount on which we have to apply the simple interest rate of 1% or 1.5% per month or part of month, as the case may be?

Suppose I gave Rs. 105000 as contract payment on 01.10.2010. And I deducted Rs.1575 as TDS on the same day. I should have deposited to the credit of the Central Government on or before 07.11.2010. But I unfortunately did deposit on 08.11.2010. So then I have to deposit the Tax Deducted at Source with interest as per Section 201(1A).

How should I calculate interest?

1600 * 1.5% or

1500 * 1.5% or

1580 * 1.5% or

1570 * 1.5%

Regards,

Sridharan

Salem

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4 Replies

(Guest)

TDS Rates u/s 194C is 2% for Co & firms & 1% for HUF and Individual.

As per my knowledge , In above example you have deducted tax @ 1.5%. I am not able to understand which rate you have applied.

Also, since, late payment is made, interest will be attracted on the amount of Tax deducted by you i.e. Rs.1575/- @ 1.5% for one month.

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Amol Gopal Kabra (CA,CS,DISA) (Practicing CA) (8539 Points)
Replied 16 May 2011

I wonder how the amount Rs. 1575 arrived. But i think it is the composite payment of various types of assessees i.e. it includes 1% also and 2% also.

But considering the above, the interest shall be calculated as below:

Rs. 1575 * 1.5% = 23.625 and the result will be rounded off to the nearest integer, i.e. Rs. 24.

The total payment shall be Rs. 1575 + Rs. 24 = Rs. 1599

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sssvkSridharan R. (CA (Final) Salem. Tamilnadu. sssvksridhar@yahoo.co.in) (218 Points)
Replied 17 May 2011

I think you have wrongly typed the TDS amount. Any I think your doubt is related only to whether the rate of interest (1% or 1.50%, as the case may be) should be applied to the multiples of hundred or to the multiples of ten.

Please read the Rule 119A which says in its sub-clause (c ),

“the amount of tax, penalty or other sum in respect of which such interest is to be calculated shall be rounded off to the nearest multiple of one hundred rupees and for this purpose any fraction of one hundred rupees shall be ignored and the amount so rounded off shall be deemed to be the amount in respect of which the interest is to be calculated.”

So as per the above rule, Rs. 1575 should be rounded off to the nearest multiples of hundred ignoring the fraction of Rs. 75. The result will be Rs. 1500. And 1% or 1.5%, as the case may be applied to the Rs. 1500. That is Rs. 1500 x 1.5% or 1.00% would be the interest payble by the assessee.