Wednesday, February 11, 2009

TDS DEPOSIT LATE BY ONE DAY :PENALTY 2% ??


on Wednesday, February 11, 2009

Dear Friend,

Generally people take the due date of the tax deposit seriously ,but some of them are casual about it and don't bother and deposit the TDS by their own comfort.but do you know that even a delay of one day some time cost you Interest @ 2% . Yes,as per rules of income tax it is so.Before going in the detail ,Please note what are the due date to deposit the TDS under various sections of the income tax act.
Due Dates To deposit Tax deducted on or After 01.04.2010 is given below.

As per income tax Act date To deposit the TDS(tax deducted at source) is to de deposited as per following due dates.The following Chart is applicable for tax deducted up to 31.03.2010.


Interest on late payment of TDS, is applicable at following rates by simple interest rate method.



A) period prior to 01.04.08 interest is chargeable @ 12 per cent per annum.

B) after .01.04.08 interest is chargeable @ 1 per cent for every month or part of the month ,means full month interest will be charged for fraction period of month

other points

  1. while calculating interest TDS amount payable on which interest is to be calculated (principal amount) should be rounded of to nearest multiple of 100 ignoring fraction of Rs.100.
  2. Interest will be charged on the amount payable form the date on which such tax deductible to the date of actual payment.
  3. Means while calculating period for interest purpose ,the period prescribed for making the payment to the credit of central government is not to be excluded.
  4. Interest liability is absolute and mandatory and should be deposit through self assessment and assessing officer can not exempt from interest liability.
  5. With effect from 1.6.2006 ,this interest must be paid on self assessment basis by the person every quarter before furnishing the quarterly return.(form 24Q/26Q/27Q)

Now ,why I am saying one day dealy cost you 2%???

As per point 2 ,if Tds has been paid late then interest will be applicable
  • from the date of deduction of TDS/date on which Tds is Deductible
  • To date of actual payment of TDS.
Suppose we have deducted TDS from a person on date 01.01.2009 u/s 194C .As per Chart shown above payment due date for deposit is 7.02.09 and if we have made payment on 8.02.09 then Interest will be applicable from date of deduction ,as while calculating period for interest on late deposit of tds ,period prescribed for making payment to the credit of Central government is not to be excluded.so Interest period will be calculated as under.

  • 01.01.2009 to 01.02.09-One month.
  • 02.01.2009 to 08.02.09-part of month =one month
so interest for two month @ 1% /per month will becomes 2% ,so delay for one day cost you 2%?!!!
Further Interest on Tds rate has been Increased By Finance Act 2010 From 01.07.2010.Summarry of new Provisions is given below

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) 
Interest from 01.07.2010
  • 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)


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