Tds on icd interest
This query is : Resolved
ramesh vadnala
(Querist)
10 August 2013
last year we have taken ICD from promoters and decided to not pay interest due low profits, during the year we want to pay interest from the date ICD taken last year, what are the implication of TDS ? pl advise
ramesh vadnala
(Querist)
12 August 2013
last year we have taken ICD from promoters and decided to not pay interest due low profits, during the year we want to pay interest from the date ICD taken last year, what are the implication of TDS ? pl advise
27 July 2025
Regarding **TDS on ICD (Inter Corporate Deposit) interest** paid retrospectively, here’s what you need to know:
---
### Situation:
* ICD was taken from promoters last year.
* No interest was paid last year due to low profits.
* Now, during the current year, you want to pay interest *for the previous year’s period* (retrospective interest payment).
---
### TDS Implications:
1. **TDS is deductible when interest is paid or credited**, whichever is earlier (Section 194A).
2. Since interest was not credited or paid last year, **no TDS was deductible then**.
3. Now, when you are paying the **interest for the earlier period in the current year**, the payment/credit is happening *this year*, so **TDS must be deducted now on the full interest amount being paid, including retrospective interest**.
4. **Failure to deduct TDS may lead to disallowance under Section 40(a)(ia)** and interest/penalty on late deduction or non-deduction of TDS.
---
### Key Points to Remember:
* Even if the interest relates to past period, the moment you pay or credit the interest, TDS applies.
* Deduct TDS @ 10% (if promoters are individuals/HUF, else 30% if promoter is a company or others), unless the promoter has submitted PAN or applicable lower/nil deduction certificate.
* Deposit TDS timely and issue TDS certificate to promoters.
---
### Summary:
| Scenario | TDS Treatment |
| ------------------------------------------- | -------------------------------------------- |
| Interest not credited/paid last year | No TDS deducted last year |
| Interest paid now (including retrospective) | TDS deductible on entire interest amount now |
---
---
### Situation:
* ICD was taken from promoters last year.
* No interest was paid last year due to low profits.
* Now, during the current year, you want to pay interest *for the previous year’s period* (retrospective interest payment).
---
### TDS Implications:
1. **TDS is deductible when interest is paid or credited**, whichever is earlier (Section 194A).
2. Since interest was not credited or paid last year, **no TDS was deductible then**.
3. Now, when you are paying the **interest for the earlier period in the current year**, the payment/credit is happening *this year*, so **TDS must be deducted now on the full interest amount being paid, including retrospective interest**.
4. **Failure to deduct TDS may lead to disallowance under Section 40(a)(ia)** and interest/penalty on late deduction or non-deduction of TDS.
---
### Key Points to Remember:
* Even if the interest relates to past period, the moment you pay or credit the interest, TDS applies.
* Deduct TDS @ 10% (if promoters are individuals/HUF, else 30% if promoter is a company or others), unless the promoter has submitted PAN or applicable lower/nil deduction certificate.
* Deposit TDS timely and issue TDS certificate to promoters.
---
### Summary:
| Scenario | TDS Treatment |
| ------------------------------------------- | -------------------------------------------- |
| Interest not credited/paid last year | No TDS deducted last year |
| Interest paid now (including retrospective) | TDS deductible on entire interest amount now |
---
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