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Interest on late deposit query

rajesh (Accountant) (583 Points)

08 February 2011

DEAR SIR

AN ASSESSEE TDS DEDUCT IN DEC-10, ACTUALLY HESI DEPOSIT TDS IN 07-01-2011 BUT HE IS DEPOSIT 03-02-2011 IN THIS CASE ASSESSEEE PAID INTEREST ON TDS IS @ 1.5% FOR 2 MONTHS OR 27 DAYS PLEASE CLARYFY

THANKS

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8 Replies

Pankaj Arora (Learner) (3134 Points)
Replied 08 February 2011

Actually tds deducted in dec-10 and deposited on 03.02.11 than he is liable for penalty of two months.

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CA SANDESH MAHIPAL (Practicing in GST and MSME ) (1985 Points)
Replied 08 February 2011

he has to pay interest for 2 months

1 Like

CA Seema Kochar (CHARTERED ACCOUNTANT) (636 Points)
Replied 08 February 2011

Interest have to be calculate from date of deduction.

1 Like

CA. BIJENDER KR. BANSAL (ACA, B.COM) (8143 Points)
Replied 08 February 2011

Dear All,

A day’s delay in TDS remittance – Interest upto 3%

Yes, TDS remittance delayed by a day may cost the deductor up to 3%. So next time, as a deductor if you are not serious about the due date for TDS remittance, just think about this.

Due date for TDS remittance

Ø Where the amount is credited or paid during the month of March – Due date 30^th April.

Ø Other cases – within 7 days from the end of the month in which the deduction is made.

What if the above deadline is missed?

According to Section 201(1A) which is amended by Finance Act, 2010(effective from 01-07-2010):

“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 1% 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 1.5% 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”

So, as per the above section, if the tax was deducted, but was not remitted within the due date, interest will be applicable : from the date of deduction to the date of actual payment of TDS.

Relevant Points

1. Interest @ 1.5% will be applicable from the date of deduction till such amount is actually paid and for every month or part thereof. While calculating the period for interest, the period prescribed for making the payment (i.e period up to the due date) cannot be excluded.

2. This interest liability is absolute and should be deposited through self assessment; and the AO or any other Authority cannot waive off such liability for any reason.

3. While calculating the interest, the defaulted TDS amount shall be rounded off to the nearest multiple of 100, any fraction thereof may be ignored.

How 3% interest for a delay of 1 day?

Now, consider an example. Tax was deducted on certain payment made on 05-07-2010. As mentioned above, the due date for payment of this amount to the credit of Central Govt. is 07-08-2010, but the deductor makes the payment on 08-08-2010. Now, interest will be applicable not after the default, but from the date of deduction, which is 05-07-2010 and while calculating the period for interest, the period prescribed for making the payment to the Govt. cannot be excluded. So, applicable interest will be :

From 05-07-2010 to 04-08-2010 – 1 Month

From 05-08-2010 to 08-08-2010 – part of the month, to be considered as full month.

Thus, interest for 2 months @ 1.5% per month will be 3% and a delay of 1 day in remittance of TDS has resulted in payment of 3% interest by the deductor!!!

2 Like

Naveen (B.COM, CA Final) (468 Points)
Replied 08 February 2011

thanks Bijendar sir for ur detailed answer.........

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Gulshan Kumar (Professional Accountant) (119 Points)
Replied 09 February 2011

for late deposited of tds amount interest is calculated @ 1.5% p. m. from tds was deducted, interest on tds amount not calculated on days basis, monthwise, whenever part of the month take full month on the time of interest calculated.

Gulshan Kumar (Professional Accountant) (119 Points)
Replied 09 February 2011

for late deposited of tds amount interest is calculated @ 1.5% p. m. from tds was deducted, interest on tds amount not calculated on days basis, calculated on monthwise, whenever part of the month take full month on the time of interest calculated.