TDS on disallowance and reporting

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Rudramuni M.R (Querist)
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25 July 2025 Hello
Could you please advise on the following:
If we do not deduct TDS on professional fees, contractual expenses, foreign payments, and similar items, the expenses will be disallowed in our financials as well as in the Income Tax Return (ITR). If we deduct the TDS in subsequent years, the expenses may be considered allowable.

My question is: we already disallowed the expenses last year, and now we are deducting the TDS. Is it necessary to calculate and pay interest on the delayed deduction of TDS? Is there any way to avoid the interest implications in such cases?

Also, which year TDS return we have to report these delay deduction?? whether it is deducted FY or suppose to be deducted FY??

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)
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12 August 2025 1. Interest on delayed TDS deduction
As per Section 201(1A) of the Income Tax Act, if TDS is deducted late, interest is payable from the date on which TDS was deductible to the actual date of deduction.
So, yes, interest is generally applicable on delayed deduction of TDS.
The rate is usually:
1% per month or part of a month on the principal TDS amount from due date to actual deduction date.
2. Is there a way to avoid interest?
No standard exemption from interest on delayed TDS deduction.
However, if you can justify a reasonable cause or genuine difficulty, sometimes the assessing officer may waive or reduce interest, but this is at their discretion.
To avoid interest, deduct TDS on time going forward.
3. Impact of deducting TDS now when expenses were disallowed earlier
Since expenses were disallowed earlier due to non-deduction of TDS, deducting TDS now and depositing it may help claim expenses as allowable in the current year.
You may need to file a revised return for the earlier year or claim adjustment in the current year as per AO’s guidance.
4. Which year to report TDS in TDS returns?
TDS must be reported in the TDS return of the financial year in which the TDS is actually deducted and deposited.
For example, if TDS was deductible in FY 2023-24 but deducted only in FY 2024-25, it must be reported in FY 2024-25’s TDS return.
However, the TDS certificate (Form 16A) will reflect the FY of deduction, and you can provide it to the deductee accordingly.

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