Interest on late payment of interest

This query is : Resolved 

(Querist) 07 November 2011

201[(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 the whole or any part of the tax 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,—

(i) at one per cent for every month or part of a month on the amount of such tax from the date on which such tax was deductible to the date on which such tax is deducted; and

(ii) at one and one-half per cent for every month or part of a month on the amount of such tax from the date on which such tax was deducted to the date on which such tax is actually paid,

and such interest shall be paid before furnishing the statement in accordance with the provisions of sub-section (3) of section 200.]

In above said wording of Income Tax Act Sec 201(1A) it is not so clear that Interest is chargeable on Late Payment of Interest on delay in TDS payment. We got an notice with interest on late payment of interest so anybody could confirm correctness of the same. Your early reply will be appreciable.

CA PARAS BAFNA (Expert) 07 November 2011


In case of delayed payment of Tax (say Rs 5000), it is required to pay with the interest for delay (Say Rs. 400).
The Total Amount thus becomes payable is Rs 5400/-.
If you have deposited Rs 5000/ only, Rs 400/ can be first adjusted towards Interest.
As such your Tax Payment falls short by Rs 400/, on which interest can be levied by the department.

sachin (Querist) 13 November 2011


Such adjustment is specifically given under section 140A for self assessment tax. So how the same is applicable in case of TDS if it is not mention in section 201(1A).

CA PARAS BAFNA (Expert) 13 November 2011

As it is required by the section itself to pay interest before furnishing the e-tds return, the department can consider that the ever compliant assessee has paid the interest and what has left to be paid is principal only.
Please read the second last para of the query which will clear the doubt.

sachin (Querist) 14 November 2011

Thanks Sir,

Finally charging of interst on interest is on cosideration of department even though it is not specifically mention in the Act.

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