How to Calculate Interest on Late Payment of TDS?

TDS payment is one of the most important tasks as the interest becomes hefty on late payment or late filing of TDS return. There are three aspects as to how to calculate interest on late payment of TDS. 

You can calculate TDS as per:

• How to calculate interest on TDS late payment as per  u/s 201 (1A),

• How to calculate interest on late deduction of tax deducted at source 

• How to calculate fees and penalty due late filing of TDS.

I will specifically speak about int on late payment of TDS.

How to calculate interest on late payment of TDS u/s 201 (1A)?

To learn about the calculation of interest on late payment of TDS, you should know the due date of TDS deposit and interest on late deduction on TDS.

Due date to deposit TDS

Interest for late deductions on TDS:

You need to pay 1.5% per month or part of the month from the date of TDS deduction to the actual date of payment of TDS if you were late to pay the TDS.

Example of late payment of TDS:

You can see that in the above example the interest that needs to be paid as a penalty for late payment of TDS. You can check column 2, where it stated that 1-day delay can charge 3% interest. 

Let's check the time span for government and non-government deductors.

This is the information I needed to share about how to calculate interest on TDS late payment. There are calculators also available on the internet that can help you calculate TDS for late payment. I hope you find this answer informative. 

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Wondering about

interest for late payment of TDS.

In India, interest on late payment of TDS (Tax Deducted at Source) is calculated under Section 201(1A) of the Income Tax Act, 1961.

How to Calculate Interest on TDS Late Deposit?

The interest is charged at a rate of 1.5% per month or part of the month on the amount of TDS deducted, from the date on which TDS was deducted to the date on which it is actually deposited.

TDS Late Payment Interest Calculation with Example

1. TDS deducted during a month must be deposited to the government by the 7th of the following month. For example, TDS deducted in January should be deposited by the 7th of February.

2. Count the number of months (including part of the month) from the due date to the actual date of payment.

3. Multiply the amount of TDS deducted by the number of months of delay, and then multiply it by the interest rate of 1.5% per month (or part thereof).

Let's say you deducted TDS of Rs. 10,000 in January but failed to deposit it until April.

• Number of months delayed = 3 (February, March, April)

• Interest = Rs. 10,000 * 3 * 1.5% = Rs. 450

1. Add the interest calculated to the original TDS amount.

2. While paying the delayed TDS, include the calculated interest amount.

Remember, accurate compliance with TDS regulations is crucial to avoid penalties and interest charges. This is all about

interest for late payment of TDS.

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The

interest calculation for TDS late payment

is as per the provisions of the Income Tax Act, 1961. The process for

TDS interest calculation on late payment

involves the following steps:

• Check the due date for depositing the TDS with the government. In many cases, the due date is the 7th day of the following month in which TDS is deducted.

• Confirm

  the date on which TDS was actually deducted by the deductor (payer).

• Find the number of late days between the due date and the actual date of deduction.

• The interest rate for late payment of TDS was 1% per month.

• Use the following for

  interest calculation for TDS late payment:

Interest Amount = (TDS Amount) x (Interest Rate) x (Number of Months or Part Months)

Where:

• TDS Amount: The amount of TDS that was deducted late or not deducted.

• Interest Rate: The monthly interest rate applicable for the period of delay.

• Number of Months or Part Months: The number of months or part months for which the TDS was delayed.

: Let's say you were asked to deduct and deposit TDS of Rs. 10,000 on June 7, 2023, but you deducted and deposited it on July 15, 2023. The interest calculation would be as follows:

• TDS Amount: Rs. 100,000

• Interest Rate: 1% per month (0.01 as a decimal)

• Number of Months or Part Months: 1 month and 8 days (from June 7 to July 15)

Interest Amount = Rs. 100,000 x 0.01 x 1.267 (rounded to 3 decimal places) = Rs. 1267.0

So, the interest on late payment of TDS would be approximately Rs. 1267.0

This is the process of

interest calculation for TDS late payment.

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What I have understood through my experience is that TDS payment delay could be caused by a number of factors. TRACES may issue a demand notice with interest and any applicable penalties if the deductor deposits TDS (beyond the due date) without interest. Therefore, it is advised to pay the relevant interest as well if there is a delay in the TDS Deposit. 

But if there is a delay you can calculate it through interest on TDS late payment calculator.

How to calculate TDS interest on late payment?

The following fines will apply if you fail to deposit TDS by the due date:

• If you don't file the return by the deadline, there will be a late filing fee.

• If you don't deposit the TDS amount on time, interest will accrue.

• If TDS is not filed within a year of the deadline, there will be a penalty.

There are three types of Interest / Late filing fees for Late Payment of TDS.

• Interest on Late Payment of TDS

• Interest on Late Deduction of TDS

• Fee on Late Filing of TDS

Interest on Late Payment of TDS

According to Section 201(1A), from the Date of Deduction (of TDS) until the Date of Payment, you must pay interest at the rate of 1.5% every month, or portion of a month. "Non-payment of tax after deduction, in whole or in part," is subject to this interest.

TDS late payment interest calculation example

To understand how to calculate TDS late payment interest, go through the following example.

Tax deducted on March 19, 2020

TDS was deposited on May 4 (the deadline being April 30).

19 March to 31 March is one month; 

1 April to 30 April is the second month; 

1 May to 4 May is the third month.

Instead of counting the days in each month, it is viewed as a "Calendar Month." For the purpose of determining the delay in a month, each month is treated as a "Calendar Month." Therefore, despite the 4 day delay, the interest is due for three months. 4.5% would be the total interest rate.

TDS Payment Due Dates

The table below lists the deadlines for depositing tax withheld at source and filing TDS returns for the fiscal year 2023–2024 for each deductor.

Tax Deduction at Source (TDS) is a method of collecting taxes directly from the source of revenue. This idea states that employers must deduct tax at source from their employees' salaries and return it to the account of the central government. So let’s understand the TDS late payment interest rate.

How to calculate interest on TDS late payment with example?

The following is the TDS interest calculation for late payment:

If you pay your TDS after the deadline, you must pay interest in accordance with Section 201(1A). TDS interest is calculated at a rate of 1.5% per month starting from the due date.

Consider a situation in which your payable TDS amount is 6,000, the due date is January 10, and you pay it on May 18. The interest you must pay is then 6,000 x 1.5% p.m. x 5 months, which comes to Rs.450 according to the TDS late payment interest calculator.

The above considerations will help with the correct TDS late fees calculation. You can utilise an online TDS calculator for the most accurate results. How is penalty for late payment of TDS calculated must be clear to you now.

What penalties do you have to face for filing TDS late?

If you file your TDS return late and pay TDS late, you will also be subject to a penalty under section 271H. If your TDS data is inaccurate, at least submit the statement by the deadline to avoid facing large fines. If you submit your TDS return more than a year late or if you provide false info (such as a wrong pan number or challan number) in your TDS statement, you will be fined.

The fine ranges from Rs. 10,000 to Rs. 100,000.

I hope you understood the calculation for TDS late payment interest rate.

Hey Pal,

The basis for calculating interest on late payment of TDS calculator is a rate of 1.5% per month from the day TDS was deducted until the actual date of deposit, applied as complete months (i.e., the part of a month is considered a full month).

According to section 201(1A), interest is due if you make a late payment (deposit) of TDS after deduction.

You are required to pay a fee of Rs 200 (two hundred) per day after the due date has passed until your return is filed, in accordance with Section 234E.

However, the total price cannot be greater than the TDS amount that you are required to pay.

• Check the TDS payment deadline - The TDS payment deadline is the 7th of the next month.

• Determine the months for interest on late payments.

• Calculate the interest at a rate of 1.5% for a month.

You should use the TDS late fee calculator as a guide for estimating finances.

I have gone through Sunanina’s answer, and I completely agree with her. I would like to thank her because of her detailed answer. 

I would like to conclude here about the interest on late payment of TDS calculator. I hope this helps:)

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