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TDS not deducted on Sub-Contracted services

05 November 2019

Our company has hired one consultant on a contract basis with a monthly payment of 60000 per month. Last month i.e. for October 2019 month we forgot to deduct the TDS. What will be charges do we as a company need to pay for not deducting and non-deposoting the TDS on time.

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2 Replies

PHANEENDRA MALLA (CA Practice) (93 Points)
Replied 05 November 2019

Company should pay Interest @ 1% for Non Deduction from the date of payment to the party till date of deduction (Period should be considered as months even if it is a part month)

For example, Date of payment to the consultant (Net of Tds) is 31.10.2019 and date of deduction of tds (accounted in books) is 05.11.2019, Interest to be calculated @ 1% for two months and tds along with interest to be remitted to government.

Please note, if tds is not remitted to the government immeditely, i.e, by 05.11.2019, additional interest of 1.5% should be paid month wise.

In our example, if deducted tds is not paid by 05.11.2019 and for suppose, it is paid on 01.12.2019, additional interest @ 1.5% should be paid for two months

Kapadia Pravin (17249 Points)
Replied 05 November 2019

Under section 201(1A) - to pay simple interest

(i) at 1% for every month or part of the month on such TDS amount from the date on which TDS was deductible to the date on which such TDS is deducted; and

(ii) at 1.5% for every month or part of a month on the amount of such TDS from the date on which such TDS was deducted to the date on which such TDS is actually paid.

Such interest, is mandatory in nature and has to be paid before furnishing of quarterly statement of TDS for respective quarter.