Paying and filing TDS on time is more than just a compliance requirement; it helps avoid penalties, interest charges, and legal trouble. If you delay TDS payments or filings, the Income Tax Department can levy strict charges. Understanding the TDS penalty for late payment, how interest is calculated, and how you can avoid unnecessary costs can help you out.
The payer must deduct TDS before making payments like salary, rent, or contractor fees, and deposit it with the government within a specified time. Failing to comply can result in:
When TDS is deducted but not deposited within the deadline, it leads to interest and penalty. The TDS penalty for late payment includes:
Depending on the transaction type, different forms are used to report TDS:
These forms must be filed quarterly to maintain compliance and avoid late filing penalties.
TDS Payment Due Dates
TDS deposited after these dates will attract interest and possibly penalties
Let’s say you deducted ₹10,000 as TDS on 1st July but deposited it on 20th August. Here’s how the TDS payment interest would be calculated:
This ₹300 represents your interest liability, which increases with each passing day.
Under Section 201(1A) of the Income Tax Act, the deductor has to pay:
Here’s a quick summary of possible TDS penalty charges:
Type of Default | Penalty/Interest Charged |
---|---|
Late Deduction | 1% per month interest under Section 201(1A) |
Late Deposit After Deduction | 1.5% per month interest under Section 201(1A) |
Late Filing of TDS Return | ₹200 per day under Section 234E (Max: TDS amount) |
Non-filing or incorrect filing | Penalty up to ₹1,00,000 under Section 271H |
Failure to deposit TDS | Penalty equal to TDS amount under Section 271C |