Interest &
Penalties

TDS interest for late deduction

Interest for the TDS late deduction is applied at a rate of 1% per month. It is applicable from the date the tax was deductible until the date of the actual deduction.

Let us consider this as an example.

A deduction of Rs. 20,000 was due on June 30. The actual deduction was on July 14. In this case, interest will be applied at a rate of 1% for two months, that is, May and June. The total amount of interest to be paid will be Rs. 20,000 x 1% p.m. x 2 months = Rs. 400.

TDS interest for late payment

Under Section 201 (1A) for late deposit of TDS after deduction, the interest payment must be at a rate of 1.5% per month.

The calculation of interest is carried out monthly and not in the number of days, that is, part of a month is considered a full month.

For example, let’s say the amount of TDS payable is Rs 10,000 and the deduction date is February 13. The TDS payment date for that deduction is July 17. So the interest to be paid is Rs 10000 x 1.5% p.m. x 6 months = 900 rupees (from the month of February to the month of July).

The payment of the interest amount must be from the date the TDS was deducted, from the expiration date of the TDS.