Calculation of interest on late payment of tds

Page no : 2

Sambit Baraj (Consulting Manager) (272 Points)
Replied 03 September 2014

A part of the month would be taken as one month.

Rahim (Businessperson) (460 Points)
Replied 03 September 2014

so the consensus is on 3 months and Rs 1125 as interest. Thanks.

vijay Sorathia (professional) (52 Points)
Replied 03 September 2014

i agree with sarvesh & sambit

CA. Pankaj Singhal (Senior Manager) (26 Points)
Replied 03 September 2014

I agree with Sambit..

praveen (student) (26 Points)
Replied 03 September 2014

Dear, In income tax act the month is not define. According to the sec 201 1A interest to be paid for 2 month only but practically it should b paid for 3 month. If u will pay for 2 month then department will raise demand for 3-2=1 month as to the best of my knowledge the department software has some problem.

Ajay (CA Job) (512 Points)
Replied 03 September 2014

Dear Rahim

The Act says the interest needs to be calculated from the date of deduction till the date of payment @ 1.5%p.m or part of month.

However, as Praveen pointed out, TRACES site computes interest based on each calender month. It is for this reason that some TDS softwares like Winman TDS shows 2 different interests based on both these methods of computation.

So in your case, actually interest will be for 2 months, that is from 21.07.2014 to 04.09.2014 (which is arrived at as - 21.07.2014 to 20.08.2014 = 1 month, 21.08.2014 to 04.09.2014 = 1 month(this is a part of a month which will be taken as one full month as the Act says so)).

So 25000*1.5%*2 = 750.

Whereas the in TRACES, this will be calculated as 3 months being July, August and September.

I guess this has not been corrected yet at TRACES and I assume that is why you got this doubt at the first place.

If you deposit as per first computation, you may get a notice to pay the balance amount of 1 more month's interest. But then you will have go for further communications with the Dept.

If you think the extra 1 more month's interest is neglible and you can afford to pay, you can pay as per TRACES compuatation as then you will not any notice for short payment of interest.

Please do correct me if i am wrong, anyone.

Regards

Ajay

1 Like

CA Gaurav Goyal (CA) (86 Points)
Replied 06 September 2014

I agree with all the experts view.. BUT dont you think that department is taking unneccesary advantage of their superiority. How can they charge such a high amount of interest and that also on month wise. It means a delay in 1 day(i.e., instead of paying on 7th if payment is made on 8th) it costs us 1.5% for 2 month i.e., 3%.

1 Like