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Interest and Penalty on Late Payment of TDS: Interests, Deadline & Penalties

In this article, we will be discussing more in-depth about the interest and penalty on late payment of TDS. So, without any further ado let’s get dive into it.

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interest and penalty on late payment of tds

Penalties and interest can be assessed if a person, who is legally required to deduct TDS in accordance with the regulations under the Income Tax Act, fails to make the required deductions. 

In this article, we will be discussing more in-depth about the penalty and interest applicable for TDS non-payment. So, without any further ado let’s get dive into it.

Overview: Interest and Penalty on Late Payment of TDS

Tax Deducted at Source often referred to as TDS was instituted to collect tax at the sources of earnings. Following the notion of TDS, the deductor is defined as the person who has the responsibility to pay a tax that is specific to another person, referred to as a deductee has to deduct tax at source and then pay the tax to an account with the Central Government.

The tax credit for the amount that was deducted, calculated on the base of Formula 26AS or TDS certificate issued by the deductor will be paid to the person deducting the tax whose income tax was taken at the source. 

The applicable provision in the Act or the First Schedule to the Finance Act includes the rates set for a tax deduction. Tax rates are specified under the Double Taxation Avoidance Agreements. taxes set out in the Double Tax Avoidance Agreements must be taken into consideration in the case of non-residents.

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Interest for Late Payment of TDS

Tax Deduction at source defaults, for that interest due, are:

  • Someone who’s obliged to deduct TDS cannot do this.
  • After the deduction of TDS, the taxpayer is unable to pay all or a portion of the tax to the credit of the government

Here are the TDS Rates for late payments that must be paid in the event of default.

By Section 201(1A) It allows for monthly interest payment in the amount of 1.5 percent on late TDS in the event of deductions. The interest rate is calculated per month rather than counting the days of the month. 

In this way, a month with a partial count is considered to be a complete month. The interest calculation is based on the date when TDS (Tax deducted at Source) is due, which is, the date that TDS was taken.

The rate of interest for late deduction of TDS is one percent per month. The interest rate is applied from the date the tax was deductible up to the time the tax was taken out. Section 201A is the default one for TDS Interest on the late deduction. TDS returns are only completed after you have paid the interest.

The payments made to residents are not tax-deductible.

In accordance with Section 201 of the Income Tax Act If the person who is responsible for deducting TDS does not deduct the whole or any portion of TDS in tax payment to a resident the person liable for deducting TDS is not an assessee-in-default due to the non-deduction. 

To qualify, the following conditions must be observed by any person who is entitled to deduct TDS.

  • The taxpayer has filed the tax return of his income in accordance with section 139.
  • It is the recipient who is a citizen of India.
  • The resident payee is required to provide an accountant’s certificate to support this claim in form Number 26A.
  • The taxpayer has paid all taxes that are due on the income shown in his income tax returns.

Also, if the above conditions are satisfied and the tax collector is not responsible, then the person accountable for tax collection at the source is not assessed as an assessee in default in regard to tax not collected or tax that he has collected.

Deadline for the due date for the payment for TDS (Tax At Source)

  • For non-governmental deductors, the deadline to pay TDS is the 7th day of the month following, with the exception of during March. In March the due date is April 30th.
  • TDS deposits for deductors of the government are due on the 7th day of the month following if they are paid via the challan. If you pay via book entry and book entry, you will be charged TDS will be taken off on the same day.

Penalty for Late Payment of TDS

Late payment of TDS attracts penalties for filing a TDS return is INR 200 per calendar day until the failure is not resolved. If the failure persists, then the maximum penalty due to late filing will be equal in amount to Tax Deducted At Source (TDS) amount.

As per Section 271C, The penalty for not being able to pay or deduct the tax at the source (TDS) is the same as the tax amount that was not taken out or paid.

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Conclusion

Each taxpayer is required to send a quarterly statement outlining the tax deduction amount. The interest for late TDS payments must be paid before making TDS Return. TDS (Tax At Source) Return, in accordance with Section 201(1A).

 If you still have any queries related to the Interest rate and penalty on late payment of TDS, we are ODINT Consultancy, here to help you out in each and every step of yours.

FAQ’s

The interest for late deposits of TDS is calculated at the amount that is one. 5% per month.

To calculate the amount of interest due for late payment the amount of debt must be divided by the amount days that the payment has been late and then divided by the daily interest rates for late payments that were in effect on the day the payment was due.

The following is the process that deductors must adhere to:

  • Login to TIN the NSDL Portal. 
  • Choose the appropriate Challan. 
  • Input details for the Challan Details.
  • Confirm Challan Details. 
  • Make a TDS Payment.
  • Online Verification.

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