In this article we will decide the Interest on Late Payment of TDS and how it is calculated
Introduction
Tax Deducted at Source, commonly known as TDS was introduced to collect tax from the very source of income. According to the concept of TDS, the deductor, understood as the person who is liable to make a payment of a particular nature to someone else, known as a deductee, has to deduct the tax at source and remit this amount in the account of the Central Government. Understanding the nuances of TDS Late Payment Interest is crucial for financial compliance. Incurring interest on delayed TDS payments can impact your bottom line. The interest rate and calculation method vary, emphasizing the importance of timely payments. Stay informed to mitigate financial repercussions and maintain a smooth taxation process. Exploring the intricacies of TDS Late Payment Interest ensures a proactive approach to financial responsibilities, fostering a compliant and financially prudent environment for businesses and individuals alike.
The credit of the amount so deducted, calculated based on Form 26AS or TDS certificate issued by the deductor, shall be given to the deductee, from whose income tax has been deducted at source. The relevant provision of the Act or the First Schedule to the Finance Act enlists the rates specified for the tax deduction. The tax rates specified under the Double Taxation Avoidance Agreements shall also be considered in case of non-resident persons
Interest on Late Payment of TDS
There are two types of TDS interest provisions:
- TDS Interest for late deduction: The rate of interest for late deduction of TDS is 1% per month. This interest rate shall be levied from the date on which the tax was deductible to the date of deduction. The Section for default for TDS on Interest for late deduction is 201A. Only after the interest is paid, the TDS return filing is possible.
- Interest on Late Payment of TDS: The interest payment for late deposit of TDS after deduction is at the rate of 1.5% per month under Section 201(1A). This interest is calculated on a monthly basis and not on the number of days which is why part of a month is considered as a full month. The payment of this interest amount is calculated to the date on which TDS is due, from the date on which the TDS was deducted.
There is a provision to pay the interest on TDS late payment before paying TDS return or after the demand for the same has been raised by TRACES. There is also a provision to adjust such an interest from the amount remaining in any TDS Challan under any section. This interest paid on delay in deposit of TDS is not considered as an expenditure under the Income Tax Act.
TDS Missed on Resident Payment: Understanding the Implications
The statement TDS not deducted on Payment made to Resident signifies that Tax Deducted at Source (TDS) was not withheld from a payment made to someone residing in India. This has various implications depending on the situation:
No TDS Requirement
- Not all payments within India require a TDS deduction.
- Content: Understand the specific type of payment, amount, and recipient’s tax status to determine if TDS applied.
- Example: Payments below the threshold limit or to tax-filing individuals might not require TDS.
Accidental Omission
- Human error or system issues can lead to unintentional TDS oversight.
- Content: Acknowledge the potential error and highlight the importance of prompt correction.
- Action: Seek professional advice to rectify the error and fulfil TDS obligations.
Find out how to calculate TDS on salary with our user-friendly online TDS interest calculator for precise results.
Deliberate Non-Compliance
- Avoiding TDS deduction intentionally violates tax regulations.
- Content: Emphasise the seriousness of non-compliance and potential consequences.
- Warning: Advise immediate consultation with a tax professional to avoid penalties and legal issues.
TDS Not Deducted for Payment Made to Resident
As provided under Section 201 of the Finance Act, the payer who does not deduct the whole or in part of the tax on the payment forwarded to the resident payee is not considered to be an assessee-in-default for the tax which he has not deducted, if the following conditions are satisfied:
- The resident recipient has provided his return for his income under section 139.
- The above income has been taken into account by the recipient of the resident in its return of income.
- The taxes due on the income have been paid by the resident recipient on the income declared in such return of income.
- A certificate to this effect has been furnished by the payee of the resident to this effect from an account in the Form no. 26A
Consequences of Filing Late TDS
Filing TDS (Tax Deducted at Source) returns late can lead to several consequences, including:
Late Filing Fees: Under Section 234E, a late filing fee of ₹200 per day is charged until the return is filed. However, the total fee cannot exceed the amount of TDS.
Interest Charges: Interest may be charged for late deduction and late payment of TDS at specified rates under Sections 201(1A) and 220 of the Income Tax Act.
Penalties: A penalty ranging from ₹ 10,000 to ₹ 1,00,000 can be imposed under Section 271H for not filing the TDS return within the due date, or for filing incorrect TDS returns.
Restriction on TDS Certificates: Delay in filing TDS returns can also restrict the issuance of TDS certificates, which can impact the deductees’ ability to claim TDS credits.
Impact on Compliance Rating: Late filing can affect the deductor’s compliance rating, potentially leading to scrutiny by the tax authorities.
It’s crucial to adhere to TDS filing deadlines to avoid these consequences and ensure smooth compliance with tax regulations.
TDS Due Dates For Financial Year 2023-24
It’s important to keep track of tax deadlines to avoid incurring fines and penalties. Typically, the deadline for submitting the Income Tax Return (ITR) for the Financial Year (FY) 2023-24 (Assessment Year, AY 2024-25) without incurring a late fee is set for July 31, 2024. The ITR filed in 2024 pertains to the income earned during FY 2023-24, spanning from April 1, 2023, to March 31, 2024. The AY 2024-25 serves as the evaluation year for the FY 2023-24, during which your income is reported and your tax-related investments are declared for assessment.
Here is the summary of the important dates and their respective tasks related to TDS and TCS compliance:
| Date | Task |
|---|---|
| January 7 | Deposit TDS/TCS for December 2023 and TDS for Oct-Dec 2023 (Sections 192, 194A, 194D, 194H). |
| January 14 | Issue TDS certificates (Sections 194-IA, 194-IB, 194M). |
| January 15 (1) | File quarterly TCS statement for Q4 2023. |
| January 15 (2) | Furnish Form 15G/15H declarations for Q4 2023. |
| January 30 | Issue TCS certificates for Q4 2023 and file TDS challan (Sections 194-IA, 194-IB, 194M). |
| January 31 | File quarterly TDS statement for Q4 2023. |
| February 7 | Deposit TDS/TCS for January 2024. |
| February 14 | Issue TDS Certificate for December 2023 (Sections 194-IA, 194-IB, 194M). |
| February 15 | Issue quarterly TDS certificate for non-salary income for Q4 2023. |
| March 2 | File challan for January 2024 (Sections 194-IA, 194-IB, 194M). |
| March 7 | Deposit TDS/TCS for February 2024. |
| March 15 | Deposit fourth instalment of advance tax for FY 2023-24. |
| March 17 | Issue TDS certificates for January 2024 (Sections 194-IA, 194-IB, 194M). |
| March 30 | File challan for February 2024 (Sections 194-IA, 194-IB, 194M). |
| March 31 (1) | Complete tax saving for FY 2023-24 (Old Tax Regime). |
| March 31 (2) | Deduct TDS on house rent > Rs 50,000/month. |
| March 31 (3) | Last date to file updated return for FY 2020-21. |
This table outlines key compliance dates for TDS/TCS deposition, certificate issuance, and related filings, helping individuals and businesses plan accordingly to meet their tax obligations.
TDS Payment Due Date For Government And Non-government
The due date for depositing TDS depends on whether the deductee is a government office or a non-government entity. Here’s a breakdown:
Non-Government:
- For TDS deducted in any month (except March), the due date is the 7th of the next month.
- Example: If you deduct TDS in January, the due date is February 7th.
- However, the deadline for TDS deducted in March is extended to April 30th.
Government:
- If the government deducts TDS using a challan, the due date is also the 7th of the next month.
- But, if the government deducts TDS through a book entry, it must be deposited on the same day, regardless of the month.
- Only for March does the government have an extended deadline – April 7th for challan and same day for book entry.
TDS late payment interest Due Date For Public Holidays And Sundays
If the TDS payment due date falls on a Sunday or a public holiday, the TDS can be paid on the next working day.
Penalty Levied
The penalty to the extent of an amount that was not deducted or remitted can be imposed on the payer. The payer is punishable with rigorous imprisonment for a term not less than three months and extending up to seven years with a fine in case the payer doesn’t pay the tax deducted to the account of the Central Government, under the provisions of Chapter XVII-B of the Section 276B.
Consequences Of Late Filing
Effective from 1st July 2012, a delay in providing the eTDS statement will end in a compulsory fee of Rs. 200 daily until the return is filed. However, in this case, the total fee does not exceed the total amount of TDS deducted for the given quarter. The late filing fee has to be paid before the filing of such an eTDS statement. If there is a failure of delaying the filing of the eTDS statement for more than a year, or the details such as PAN, Challan and TDS amount, furnished in the statement are incorrect, there will be a penalty ranging from Rs. 10,000 to 1 lakh, as decided by the Assessing Officer.
Conclusion
In conclusion, understanding the implications of interest on TDS late payment is paramount for financial diligence. This brief insight into the consequences of delayed payments emphasizes the need for timely compliance. As businesses and individuals navigate the complexities of taxation, proactive adherence to payment deadlines becomes a strategic imperative. By staying informed and addressing TDS obligations promptly, one can mitigate financial risks and maintain a smooth, penalty-free tax journey. Let this knowledge serve as a reminder of the importance of timely TDS payments, fostering financial responsibility and ensuring a seamless tax management experience for all.
FAQs
What is the penalty for non-payment of TDS in India?
For non-payment of TDS, penalties can include interest charges under Section 201(1A) of the Income Tax Act at 1.5% per month or part thereof, and a penalty under Section 221 up to the amount of TDS not paid. Further, non-filing of TDS returns can attract a penalty under Section 271H between ₹ 10,000 and ₹ 1,00,000. It's important to note that the actual penalty amount under Section 271H can vary within this range depending on various factors
Is interest on late payment of TDS allowed?
Interest on TDS is not permitted according to the Income Tax Act, 1961 regulations.
How do you calculate late interest payments online?
To determine the interest owed on a delayed payment, multiply the outstanding amount by the daily late payment interest rate applicable from the due date, and then by the total number of days the payment has been overdue.
What is the rate of interest charged for late payment of tax?
Failing to submit income tax returns by the deadline necessitates paying an interest charge of 1% per month or part thereof on any unpaid tax, as outlined in Section 234A. It is essential to understand that filing one's ITR is contingent upon settling all due taxes.
What is the late paid interest rule in India?
If an individual does not collect tax at source (TCS) as required, or does collect it but does not remit it to the government by the designated deadlines, they must pay interest. This interest is charged at a rate of 1% per month or part of a month on the amount of TCS due.
Do I have to pay interest on late payments?
Interest on late payments varies based on the individual's role and the nature of the payment. For Tax Deducted at Source (TDS), if you're the payer, you typically won't incur interest for late TDS payments, but you could face penalties under Section 221. However, as a deductee, you may need to pay interest on any unpaid tax amounts. Regarding other taxes, such as income tax, payers usually must pay interest on any late payments.
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