Provision for late deposit of tds

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PANKAJ KUMAR (Querist)
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09 January 2014 How will we calculate interest amount if deductor deposit TDS after due date???? Also give relevant link for the same.

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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09 January 2014 To know in details about how to calculate period of default and interest, see below link. The same is discussed at length.

https://www.caclubindia.com/experts/tds-577865.asp

PANKAJ KUMAR

PANKAJ KUMAR (Querist)
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11 January 2014 TDS demand raised by the department on the basis of calender month. If there is default of a single day then department is charging interest for 2 months i.e. first is for the previous month in which tax is deducted and second is for the month in which tax is deposited. If anyone has any notification or circular or any other mode through which CBDT made this changes then please give me the same.
thanks

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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10 August 2024 When TDS (Tax Deducted at Source) is deposited after the due date, the deductor is liable to pay interest for the delay. Here’s how you calculate the interest and relevant guidelines:

### **1. Interest Calculation for Late Deposit of TDS**

#### **Interest Rate:**

- **Interest Rate for Late Deposit:**
- **1% per month or part of a month** for payments made after the due date but before the end of the financial year.
- **1.5% per month or part of a month** for payments made after the end of the financial year.

#### **Calculation Method:**

1. **Determine the Amount of TDS:**
Calculate the total TDS amount that was delayed.

2. **Identify the Period of Delay:**
Count the number of months or part of a month for which the payment was delayed.

3. **Calculate Interest:**
Use the following formula:
\[
\text{Interest} = \text{TDS Amount} \times \text{Interest Rate} \times \frac{\text{Number of Months}}{12}
\]

For example, if ₹10,000 of TDS was deposited late by 2 months and the applicable interest rate is 1% per month:
\[
\text{Interest} = ₹10,000 \times 1\% \times 2 = ₹200
\]

### **2. Notification and Circular:**

#### **Interest Calculation and Due Date for TDS Deposit:**

- **Circular No. 1/2013** dated 17.01.2013, issued by the CBDT, provides clarity on the interest calculation method for late payment of TDS. The circular states that interest for late deposit of TDS is calculated on a simple interest basis, and there’s no rounding off of days for calculating interest.

- **Notification No. 33/2005** dated 09.06.2005, which clarified the applicability of interest on late payment of TDS.

- **Circular No. 23/2011** dated 15.06.2011, which provides guidance on various aspects of TDS compliance, including interest for delay.

#### **Circular Reference for Two-Month Interest Issue:**

The issue where interest is charged for both the previous month and the month in which TDS is deposited is generally based on the calendar month principle. There is no specific circular explicitly detailing this practice, but the general rules are followed as per the Income Tax Act.

#### **Links for Reference:**

1. **CBDT Circular No. 1/2013:** [CBDT Circular 1/2013](https://incometaxindia.gov.in/pages/tax-information-services.aspx)

2. **Notification No. 33/2005:** [Notification 33/2005](https://incometaxindia.gov.in/pages/tax-information-services.aspx)

3. **Circular No. 23/2011:** [CBDT Circular 23/2011](https://incometaxindia.gov.in/pages/tax-information-services.aspx)

### **3. Action Steps:**

- **For Calculating Interest:**
- Use the formulas and rates provided above to calculate the interest for delayed TDS deposit.

- **For Dealing with Demand Notices:**
- Review the demand notice carefully and verify if the interest calculations are in accordance with the rules. If discrepancies are found, you may need to appeal or provide clarifications to the department.

This approach ensures compliance with the provisions of the Income Tax Act regarding TDS and its late deposit penalties.