TDS – Late Payment Interest Calculator

A TDS interest calculator is an online tool that computes the interest payable on late deduction or late payment of Tax Deducted at Source. It helps businesses and tax professionals by automatically calculating the interest charges based on the dates and amounts entered, ensuring accuracy. By using a TDS interest calculator, you can quickly determine your interest liability for delayed TDS deposits, helping you avoid underestimating or overlooking these charges. This is particularly helpful for businesses to stay compliant and avoid penalties, as the calculator gives instant results and clear breakdowns of interest for each period of delay.

Interest on a late TDS payment is calculated at 1.5% per month or part of a month on the TDS amount, for the period of delay. The count starts from the date the TDS was originally deducted to the actual date of deposit to the government. Each commenced month in this interval is counted as a full month for interest calculation. For example, if TDS was deducted on April 15 and was supposed to be paid by May 7, but is actually paid on June 10, interest will be charged for three months (April, May, and June) at 1.5% each – totaling 4.5% of the TDS amount as interest. The formula is simple interest: TDS Amount × 1.5% × Number of months of delay.

The interest rate differs based on the nature of the delay:

• Late Deduction of TDS: 1% per month (or part thereof). This applies when you failed to deduct the tax on time. The interest is calculated from the date the tax was due to be deducted up to the date it was actually deducted.
• Late Deposit of TDS: 1.5% per month (or part thereof). This applies when TDS was deducted from payees but not deposited with the government by the due date. The interest is calculated from the date of deduction to the date of deposit. These rates are mandated by Section 201(1A) of the Income Tax Act and are fixed; they do not fluctuate unless the law is amended.

For most payments (like salaries, contractor payments, professional fees, etc.), the TDS deducted in a given month is due by the 7th of the following month. For example, TDS deducted in January must be paid by February 7. The exception is the TDS for March, which is due by 30th April (since March is end of the financial year). There are also special cases: for TDS on the sale of immovable property (Section 194IA), the deposit is due within 30 days from the end of the month in which the deduction was made (this applies even for March property transactions – 30 days from month-end, not April 30). Always check the specific due date applicable to your transaction. Paying by these deadlines will ensure you incur no interest. If a due date falls on a Sunday or public holiday, the next working day is considered the due date, but it’s best not to wait until the last day to avoid any processing delays.

The interest on late TDS payments is charged for each calendar month or part thereof of delay. This means that if you miss the due date even by one day, the delay has extended into a new calendar month, and thus interest for that entire month becomes payable. For instance, suppose TDS was deductible on July 30 and due for deposit by August 7. If you deposit on August 8, that one-day delay means August is counted as a month of delay in addition to July – resulting in 2 months’ worth of interest (July and August). The rule may seem harsh, but it is designed to strongly encourage on-time payment. There is no pro-rating of interest on a daily basis, so avoiding even a short delay can save you from an extra month’s interest charge.

Yes, apart from interest, there can be additional consequences for TDS compliance failures:

• Late Filing Fee (Section 234E): If you file the TDS return late (quarterly TDS return Form 24Q/26Q, etc.), a fee of ₹200 per day of delay is levied until you file the return. This fee is capped at the amount of TDS in that return. It essentially means you must pay ₹200/day for late filing, so timely filing is crucial.
• Penalty (Section 271C): The tax authorities may levy a penalty for non-deduction or non-payment of TDS. This penalty can be equal to the amount of TDS that was not deducted or not paid For example, if ₹10,000 TDS was not deducted/paid, the penalty could be ₹10,000. Such penalties are at the discretion of the assessing officer and typically apply in more serious or willful default cases.
• Prosecution: In extreme cases of willful and persistent default, there are provisions for prosecution (including fines and imprisonment), though this is for severe non-compliance and rare in routine late payment cases.

It’s important to note that the interest is separate from these penalties – paying the interest on late TDS does not exempt you from late filing fees or penalties if those conditions are met. To avoid all these, always deduct TDS on time, deposit it by the due date, and file your TDS returns punctually.

No, the interest paid on late TDS payments is not tax-deductible as a business expense, nor is it refundable. This interest is charged by the Income Tax Department as a compensatory measure for the delay in remitting taxes and is considered a sort of financial penalty. Since it’s levied due to non-compliance, the Income Tax Act expressly disallows such interest (and any penalties) as a deductible expense for income tax purposes. Also, once you have paid the interest (through a challan to the government), it cannot be claimed back or adjusted except against any future demand for TDS interest. Essentially, it’s a cost incurred for the delay, and the only way to avoid it is to pay on time.

Yes. Most good TDS interest calculators (including the one on this page) accommodate special cases like TDS on immovable property sales under Section 194IA. When you indicate that the TDS is related to a property purchase, the calculator adjusts the due date for payment to 30 days from the end of the month of deduction, as per the law. The interest will then be calculated based on that specific due date. This is important because the due date for TDS on property is different from regular TDS (which is usually the 7th of next month). By handling this automatically, the calculator ensures that the interest on late payment is computed correctly for property transactions. Always make sure to select the correct option (property or non-property) so that the calculator uses the right due date rule.