Applicability of Interest u/s 201(1A) when the TDS threshold is crossed.

This query is : Resolved

Chartered Accountant (Querist)
Follow

04 June 2025 Hi everyone,
I need some clarity on a TDS issue under section 194C for the financial year 2024-25.
A client made payments to a contractor as follows:
25,000 on 30th June 2024
25,000 on 30th September 2024
25,000 on 31st December 2024
and 35,000 on 15th March 2025

The total payment during the year comes to 1,10,000, which crosses the threshold limit of 1,00,000. u/s 194C TDS at 1% is being deducted on the full amount of 1,10,000 at the time of the last payment in March.

My question is — since the limit was crossed only at the time of the last payment and we are deducting TDS then, will interest under section 201(1A) be applicable for the earlier three payments?

Thanks in advance.

Nabin Agarwal

Nabin Agarwal (Expert)
Follow

07 June 2025 Sir, if its a contract, then it must have been made earlier only and u must be aware of the total contract value also. So when the 1st installment has been paid of Rs 25,000/- TDs should have been deducted and deposited only as you know that the contract value will cross the limit within 1 year. Now if that has not been done, so u can now simply show the full payment in 4th qtr and deduct TDS @ 1% on full amount. In this way you can save int and penalty both.

Chartered Accountant

Chartered Accountant (Querist)
Follow

19 June 2025 The issue was that contract was about Rs 75000 only but last installment was not predecided but I got it Thank you so much sir for giving the solution.

Upgrade to CAclubindia Pro. Subscribe Now!