The Income Tax Department charges interest for delay in depositing TDS (Tax Deducted at Source). This article explains how interest is calculated, with the formula, applicable rates, and consequences of non-compliance.
Key Takeaways
- Always deduct TDS on time when making eligible payments
- Deposit TDS before 7th of next month to avoid interest
- Use Form 26Q, 24Q for TDS return filing
- Keep track of Challan Identification Numbers (CIN) for audit trail
TDS Due Date and Criticality
TDS is the tax deducted at the source of income by the payer before making payment to the payee (employee, vendor, contractor, etc.). As per the Income Tax Act, TDS deducted must be deposited within the due date, failing which attracts interest under Section 201(1A).
TDS Due Dates
| Month | TDS Deducted | Due Date for Payment |
| April | Anytime | 7th May |
| May | Anytime | 7th June |
| June | Anytime | 7th July |
| July | Anytime | 7th August |
| August | Anytime | 7th September |
| September | Anytime | 7th October |
| October | Anytime | 7th November |
| November | Anytime | 7th December |
| December | Anytime | 7th January |
| January | Anytime | 7th February |
| February | Anytime | 7th March |
| March | Anytime | 30th April |
Interest on Late Payment of TDS – When and How Much?
Interest is levied in two cases:
Non-deduction of TDS (Failed to Deduct) Section 201(1A)(i)
- Interest Rate: 1% per month.
- Period: From the date it was deductible to the date it was actually deducted.
Non-payment of TDS (Deducted but Not Deposited) Section 201(1A)(ii)
- Interest Rate: 1.5% per month
- Period: From the date of deduction to the date of deposit
Interest on Late Payment of TDS – Calculation Formula
Interest = TDS Amount × Rate × Number of Months
Or
Interest = (Tax Deducted/Collected x Interest Rate x No. of Months Delayed in Filing) / 100
Example: TDS Deducted but not Deposited (1.5% Interest per Month)
- TDS deducted on: 10th June
- Due date: 7th July
- Actual payment: 2nd August
- Delay = 1 full month (June 10 – August 02)
Interest = ₹10,000 × 1.5% × 2 = ₹300
Example: Non-Deduction of TDS (1% Interest per Month)
Scenario:
- A company pays ₹1,00,000 as professional fees to a consultant on 10th May 2025.
- TDS of 10% (₹10,000) was applicable under Section 194J.
- The company forgot to deduct the TDS at the time of payment.
- It realized and deducted TDS only on 25th August 2025.
Calculation Of Interest
Since TDS was not deducted on time, interest is levied at 1% per month or part thereof from the date on which TDS was deductible to the date it is actually deducted.
| Particulars | Details |
| TDS deductible on | 10th May 2025 |
| TDS actually deducted on | 25th August 2025 |
| Interest Rate | 1% per month |
| No. of months (May to Aug) | 4 months (May, June, July, August) |
| TDS Amount | ₹10,000 |
| Interest Payable | ₹10,000 × 1% × 4 = ₹400 |
Penalty and Prosecution
In addition to interest:
| Late Filing Fee (Sec 234E) | ₹200/day until return is filed |
| Penalty (Sec 271H) | ₹10,000 to ₹1,00,000 for failure to file return |
| Prosecution (Sec 276B) | May include rigorous imprisonment |
Quarterly TDS Return Deadlines
The TDS deposited with the Government should be filed as a report quarterly. These apply to forms 24Q, 26Q, and 27Q.
| Click here To Know The TDS Payment and Return Filing Due Date For FY 2025-26. |
FAQs
You’ll be liable to pay 1.5% interest per month plus possible penalties and prosecution.
No. Interest under Section 201(1A) is mandatory and non-compoundable.
Deposit through NSDL (now Protean) portal using Challan ITNS 281. Interest must be paid separately along with the TDS amount.
Depositing TDS on or before the due date helps in avoiding the penalty on TDS.
