TDS Interest on Late Payment, TDS late Payment Penalty, ebizfiling,Interest and Penalty for TDS payment

TDS Interest on Late Payment and TDS Late Payment Penalty

TDS stands for Tax Deducted at Source, and it was created with the goal of collecting tax from the source of revenue. In this blog, there will be a detailed discussion on “What is TDS?”, TDS Interest on Late Payment, TDS Late Payment Penalty. Let’s have a quick look at “What is TDS (Tax Deducted at Source)?”


What is TDS (Tax Deducted at Source)?

TDS (Tax Deducted at Source), is the amount of income tax deducted from money received at the time of making certain payments, such as rent, commission, professional fees, salary, interest, and others. However, the government ensures that income tax is taken in advance from your payments by using Tax Deducted at Source regulations. The net amount is given to the income recipient (after reducing TDS). The gross amount is added to the recipient’s income, and the amount of TDS is deducted from his ultimate tax liability.

TDS Interest on Late Payment

Tax Deducted at Source defaults for which interest is due are as follows:

  • The person who is required to deduct TDS does not do so.
  • After deducting TDS, a person fails to pay all or part of the tax to the government’s credit

Below are the TDS Interest on late payment that needs to be paid in case of the above defaults


As per Section 201(1A), provides for monthly interest payment of 1.5 percent for late TDS after deduction deposits. This interest is determined monthly rather than by the number of days in the month. As a result, a partial month is treated as a whole month. This interest is determined from the date on which TDS (Tax Deducted at Source) is due, that is, from the date on which TDS was deducted.


The interest rate for late deduction of the TDS is 1 percent monthly. This interest rate will be charged from the time the tax was deductible until the time it was deducted. 201A is the default section for TDS Interest for the late deduction. TDS returns can only be filed once the interest has been paid.

Payments to residents are not subject to Tax Deducted at Source

According to the Section 201 of the Income Tax Act, if the person liable to deduct TDS fails to deduct the entire or a portion of the TDS on a payment made to a resident, then the person liable to deduct TDS cannot be considered an assessee-in-default for non-deduction. For this  following conditions should be met by a person who is liable to deduct TDS.

  • The recipient has filed his income tax return under section 139.
  • The recipient is a resident of India.
  • The resident payee provides a certificate from an accountant to this effect in form Number 26A.
  • The recipient has paid all applicable taxes payable on the income indicated in his income tax return.

In other words, if the preceding conditions are met, the person responsible for collecting tax at source will not be viewed as an assessee-in-default in respect of tax not collected or short collected by him.

Due Date for the payment of TDS (Tax Deducted at Source)

  • The deadline for non-government deductors to deposit TDS is the 7th of the next month, except in March. The deadline for March is April 30th.
  • TDS deposits for government deductors are due on the 7th of the next month if paid by challan. If you pay by book entry, the TDS will be deducted on the same day.

TDS Late Payment Penalty

TDS late payment penalty for late filing of TDS return will be INR 200 per day till the failure continues. In any case, if the failure continues then the maximum amount for late filing will be equals to the Tax Deducted at Source (TDS) amount.


According to Section 271C, the penalty for failing to deduct or pay the Tax Deducted at Source (TDS) is equal to the amount of tax not deducted or paid.


Every deductor is required to submit a quarterly statement detailing the amount of tax deducted. Interest for late TDS payment should be paid before filing the TDS (Tax Deducted at Source) Return, according to section 201(1A).


The total taxable income would be used to compute your real tax liability. You can claim credit for TDS deducted on your various receipts based on the taxes calculated. To calculate the sum due to the IT Department, subtract the Tax Deducted at Source from your actual tax liability. You may also be eligible for a refund. In either situation, you must file an Income Tax Return and either pay the tax due or request a refund.

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Author: zarana-mehta

Zarana Mehta is an MBA in Finance from Gujarat Technology University. Though having a masters degree in Business Administration, her upbeat and optimistic approach for changes led her to pursue her passion i.e. Creative writing. She is currently working as Content Writer at Ebizfiling.

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