---
title: "TDS Penalty for Late Payment: Section 234E, 271H & Interest"
description: "Find TDS penalty for late payment, Section 234E vs 271H difference, how to calculate TDS interest, TDS due dates, and best practices to avoid TDS penalties."
canonical: "https://busy.in/tds/penalty-late-payment-filing/"
author: "Susheel Kumar"
published: "2025-08-04T10:24:06.000Z"
category: "TDS"
---

-   TDS defaults can lead to interest, late filing fees, penalties, expense disallowance in specified cases, and prosecution risk in serious cases.
-   Late TDS deduction attracts interest at **1% per month or part of a month**.
-   Late deposit after deduction attracts interest at **1.5% per month or part of a month**.
-   Late TDS statement filing attracts a fee of **₹200 per day**, capped at the TDS amount.
-   Section 271H penalty for delayed or incorrect TDS statements ranges from ₹10,000 to ₹1,00,000.
-   From AY 2025-26, Section 271H penalty relief for delayed filing is available only if the return is filed **before expiry of one month from the due date**, along with payment of tax, fee, and interest.
-   Failure to deduct TDS can attract penalty equal to the tax not deducted.
-   Delay in issuing TDS certificates can attract penalty of **₹500 per day**, subject to applicable limits.
-   For Tax Year 2026-27, new TDS/TCS forms apply under the Income-tax Rules, 2026.

In this guide we discuss the main TDS penalties, when they are applicable, how interest is calculated, what has changed for FY 2026-27 and how to reduce penalty exposure after missing a deadline.

# TDS Penalty for Late Payment and Filing: Complete Guide

## **Interest for Late Deduction or Late Deposit of TDS**

### **1\. Interest for late deduction of TDS**

If tax should have been deducted on a payment but was deducted later, interest is charged at **1% per month or part of a month**. The period is counted from the date on which TDS was deductible to the date on which it was actually deducted.

### **2\. Interest for late deposit after deduction**

If TDS was deducted but [**paid to the government**](https://busy.in/gst/gst-payments-and-appeals/) late, interest is charged at **1.5% per month or part of a month**. The period is counted from the date of deduction to the date of actual payment. For example:

**Late deposit of TDS**

Suppose a business deducted TDS of ₹10,000 on 1 July 2026 but deposited it on 20 September 2026. Even a part of a month is generally counted as a full month for this interest calculation. That is why even a small delay crossing into another month can increase the interest amount.

| Particular | Calculation |
| --- | --- |
| TDS amount | ₹10,000 |
| Delay counted | July, August, September |
| Interest rate | 1.5% per month |
| Interest payable | ₹10,000 × 1.5% × 3 = ₹450 |

## **Late Filing Fee for TDS Statements**

A fee of ₹200 per day is levied for the [**late filing of TDS statement**](https://busy.in/gst/tds-return-and-payment-important-due-dates-you-should-know/) . This fee is calculated from the day after the due date until the date the TDS statement is filed. This applies even if TDS was deposited in time but return was filed late.

For example, if the late filing fee has been calculated at Rs. 18,000 but the TDS amount for that quarter is Rs. 9,000 then the fee would be limited to Rs. 9,000. This cap is confirmed by the Income Tax Department in its [penalty guidance](https://www.incometaxindia.gov.in/w/penalties-under-the-income-tax-law) .

### **Example: Late TDS return filing fee**

| Particular | Amount |
| --- | --- |
| TDS return due date | 31 July 2026 |
| Actual filing date | 17 November 2026 |
| Delay | 109 days |
| Fee before cap | ₹200 × 109 = ₹21,800 |
| TDS amount in return | ₹5,000 |
| Final late filing fee | ₹5,000 |

## **Penalty for Late or Incorrect TDS Return Filing**

Section 271H applies where a deductor either files the TDS statement after the prescribed due date or files the TDS statement with incorrect details. These details include the wrong PAN, [**wrong challan details**](https://busy.in/accounting/bank-reconciliation-statement-explained-purpose-format-and-common-errors/) , the wrong deduction amount, or an incorrect section/payment code. The penalty ranges from **₹10,000 to ₹1,00,000** and it is separate from the ₹200/day late filing fee.

### **When Section 271H penalty may not apply**

From AY 2025-26, the Assessing Officer should not impose Section 271H penalty for delayed filing if all of the following conditions are met:

1.  The TDS has been paid to the government.
2.  Applicable late filing fee and interest have been paid.
3.  The TDS statement is filed before the expiry of one month from the prescribed due date.

This relief applies only to delayed filing cases. It does not protect a deductor who has furnished [**incorrect information**](https://busy.in/gst/common-errors-filing-gst-returns/) in the TDS/TCS statement.

## **Penalty for Failure to Deduct TDS**

[**Failure to deduct TDS**](https://busy.in/gst/what-are-the-different-offences-and-penalties-recognized-under-gst/) is a more serious default than late deposit. If a deductor was required to deduct tax but failed to do so, penalty can be equal to the amount of tax that should have been deducted.

However, there is an important distinction. If TDS was actually deducted but paid late, Section 271C penalty for failure to deduct should not be applied merely because of the late deposit. The Supreme Court has held that Section 271C applies to failure to deduct tax, not to mere delay in remitting tax that was already deducted. In such [**delayed deposit cases**](https://busy.in/gst/due-dates-gst-payment/) , interest and possible prosecution provisions may still apply depending on the facts.

### **Practical example**

| Situation | Likely consequence |
| --- | --- |
| TDS was never deducted | Interest, recovery, possible Section 271C penalty |
| TDS was deducted but deposited late | Interest applies; Section 276B exposure should be reviewed separately |
| TDS was deducted and deposited, but return was filed late | Late filing fee and possible Section 271H penalty |
| TDS return was filed with wrong PAN/challan details | Correction statement and possible Section 271H penalty |

### **Expense disallowance for TDS default**

Apart from interest, recovery, and penalty exposure, failure to deduct or deposit TDS can also affect expense deduction in specified cases. For payments to non-residents, Section 40(a)(i) may apply to sums, other than salary, that are chargeable to tax in India and are paid without TDS deduction, or where TDS was deducted but not deposited within the prescribed time. For resident payments, Section 40(a)(ia) provides for 30% disallowance where TDS was deductible but not deducted, or after deduction was not deposited on or before the due date of filing the [**income tax return**](https://busy.in/gst/the-difference-between-gst-and-income-tax-what-you-need-to-know/) .

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## **Penalty for Not Issuing TDS Certificates on Time**

TDS [**certificates should be issued**](https://busy.in/accounting/gst-compliant-bookkeeping-best-practices/) in the prescribed time frame. A delay in the issuance of certificates may attract a penalty of ₹500 per day for each day the failure continues, subject to the applicable statutory cap. This penalty is covered under Section 272A for the certificates governed under the Income-tax Act, 1961.

### **Certificate due dates during transition**

For FY 2025-26, the old certificate references, such as [Form 16](https://www.incometaxindia.gov.in/tax-services/form-16a-download-deductor) and Form 16A, continue to apply. For Tax Year 2026-27, the official transition FAQs mention new certificate forms under the Income-tax Rules, 2026:

| Period | Certificate type | Form |
| --- | --- | --- |
| FY 2025-26 salary TDS | Salary TDS certificate | Form 16 |
| FY 2025-26 non-salary TDS, including Jan-Mar 2026/Q4 | Non-salary TDS certificate | Form 16A |
| Tax Year 2026-27 salary TDS | Salary TDS certificate | Form 130 |
| Tax Year 2026-27 non-salary TDS | Non-salary TDS certificate | Form 131 |

The official transition FAQs state that the salary TDS certificate for Tax Year 2026-27 is Form 130 and is due by 15 June 2027. The non-salary TDS certificate for the April-June 2026 quarter is Form 131 and is due by 15 August 2026. The actual final penalty should be checked against the statutory cap, because the certificate-related penalty is generally capped at the amount of [**tax deductible or collectible**](https://busy.in/gst/important-things-to-know-about-tax-collected-at-source-tcs/) .

### **Example: Delay in issuing non-salary TDS certificate**

Suppose the non-salary TDS certificate for the April-June 2026 quarter was due on 15 August 2026 but was issued on 5 September 2026.

| Particular | Calculation |
| --- | --- |
| Days delayed | 21 days |
| Number of deductees | 20 |
| Penalty rate | ₹500 per day |
| Penalty exposure before statutory cap | ₹500 × 21 × 20 = ₹2,10,000 |

## **TDS Due Dates for FY 2026-27**

### **Monthly TDS payment due dates**

For April 2026 onwards, non-government deductors continue to deposit TDS by the 7th of the following month, while March deductions are payable by 30 April. Government deductor rules differ depending on challan and non-challan [**payment modes**](https://busy.in/gst/gst-payment-online/) .

| Deductor type | Payment situation | Due date |
| --- | --- | --- |
| Non-government deductor | April to February deductions | 7th of the next month |
| Non-government deductor | March deductions | 30 April |
| Government deductor | Tax paid with challan | 7th of the next month |
| Government deductor | Tax paid without challan | Same day |

### **Quarterly TDS statement due dates**

Always check the active Income Tax Department calendar before filing because the department may issue extensions for specific periods.

| Quarter | Period | Due date |
| --- | --- | --- |
| Q1 | April to June 2026 | 31 July 2026 |
| Q2 | July to September 2026 | 31 October 2026 |
| Q3 | October to December 2026 | 31 January 2027 |
| Q4 | January to March 2027 | 31 May 2027 |

## **TDS Forms Applicable for FY 2026-27**

For earlier periods, deductors commonly used Form 24Q, Form 26Q, Form 27Q, and Form 27EQ. Under the Income-tax Rules, 2026, [**new form numbers**](https://busy.in/gst/gst-returns-types-and-due-dates/) apply for Tax Year 2026-27 filings.

| Earlier form | Used for earlier periods | New form for Tax Year 2026-27 |
| --- | --- | --- |
| Form 24Q | Salary TDS statement | Form 138 |
| Form 26Q | Resident non-salary TDS statement | Form 140 |
| Form 27Q | Non-resident TDS statement | Form 144 |
| Form 27EQ | TCS statement | Form 143 |

## **What to Do If You Miss a TDS Deadline**

### **Step 1: Identify the default**

Each default triggers a different consequence, so treating all TDS delays as the same can lead to wrong calculations.

-   TDS was not deducted
-   TDS was deducted late
-   TDS was deducted but deposited late
-   TDS statement was filed late
-   TDS statement was filed with incorrect details
-   TDS certificate was issued late

### **Step 2: Calculate interest, fee, and possible penalty exposure**

Calculate the unpaid TDS, applicable interest, late filing fee, and any possible penalty exposure based on the type of default. Use the detailed rules explained in the earlier sections before making payment or filing a correction statement.

### **Step 3: Pay the outstanding amount**

Use the active Income Tax Department e-Pay Tax workflow or the prescribed challan process at the time of payment. Do not rely on old portal path instructions as payment screens, labels and utilities may change during the new Act transition.

### **Step 4: File or revise the TDS statement**

Use the latest utility available for the relevant period. For corrections for prior years, FY 2025-26 or earlier, use the old form layout. Use the revised form and section/payment code layout for returns for Tax Year 2026-27.

### **Step 5: Check TRACES or the active portal for defaults**

After filing, review the default summary. Quickly correct short payments, short deductions, PAN errors, challan mismatches, unmatched deductee rows, etc. Delayed correction may lead to unnecessary notices, interest and penalty exposure.

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## **Form 26A Relief When TDS Was Not Deducted**

If TDS was not deducted on a payment made to a **resident** payee, the deductor may avoid being treated as an assessee-in-default if the payee has already reported the income and paid tax on it. Broadly, Form 26A relief is available when:

1.  The payee is a resident.
2.  The payee has filed the income tax return.
3.  The relevant income has been included in that return.
4.  Tax due on that income has been paid.
5.  The required accountant certificate is furnished.

Even after Form 26A relief, interest may still be payable. This relief should not be casually assumed for non-resident payments. Non-resident TDS defaults need separate review because Form 26A-style relief is not generally applied in the same simple manner.

## **When TDS Default Can Lead to Prosecution**

Prosecution risk arises mainly when TDS has been deducted but not paid to the government. This is treated more seriously because the deductor has already collected tax on behalf of the government but has not remitted it.

Current official guidance also states that Section 276B shall not apply where the TDS payment is made to the Central Government on or before the time prescribed for filing the relevant TDS statement. This relief is applicable from 1 October 2024. Where prosecution exposure remains, the law provides procedural safeguards and possible relief routes:

-   Prosecution requires sanction from the prescribed authority.
-   Section 278AA provides a reasonable-cause defence.
-   Certain offences may be compounded by the competent authority, subject to applicable conditions.

## **Practical Ways to Avoid TDS Penalties**

### **Maintain a monthly TDS checklist**

TDS compliance should not be handled only at quarter-end. A monthly checklist should cover deduction, challan payment, PAN validation, vendor classification, TDS rate selection, and [**ledger reconciliation**](https://busy.in/accounting/ledger-in-accounting/) . This reduces the risk of discovering errors only when the return is due.

### **Reconcile challans before filing**

Many TDS notices arise not because tax was unpaid, but because challan details were entered incorrectly. Match BSR code, [**challan serial number**](https://busy.in/accounting/how-to-adapt-ledger-formats-for-tax-preparation/) , challan date, amount, and section/payment code before uploading the statement.

### **Track certificate issuance separately**

Filing the TDS statement is not the final step. TDS certificates must also be issued on time. Add a separate internal reminder for certificate generation and dispatch after every quarterly filing. This ensures the filing process does not stop at return upload, and [**certificate compliance**](https://busy.in/accounting/gst-audit-preparation-using-software/) is completed on time.

### **Keep proof for reasonable-cause cases**

If a delay occurred for genuine reasons such as a banking failure, portal downtime, a medical emergency, a natural disruption, or a severe operational issue, preserve [**supporting documents**](https://busy.in/accounting/what-is-bookkeeping-benefits-principles-and-the-process/) immediately. Reasonable-cause arguments are weaker when records are created only after a notice arrives.

### **How BUSY Helps with TDS Management**

Businesses that handle frequent vendor payments, salary deductions, and quarterly compliance can use BUSY [**accounting software**](https://busy.in/accounting-software/) to manage TDS-related work in a more systematic manner. It helps track deductions, challans, reports, and certificate-related details so that TDS compliance does not depend only on manual follow-ups or last-minute checks.

## **Conclusion**

TDS penalties can be avoided if businesses handle three things carefully: deduct tax correctly, deposit it within the due date, and file [**accurate TDS statements**](https://busy.in/gst/gst-compliance-rating-an-introduction/) on time. Even a small delay can result in interest, late-filing fees, penalty notices, or certificate-related defaults.

If a deadline has already been missed, the best approach is to act quickly. First, identify the exact default, then pay the pending TDS, interest, and late fee, and file or correct the required TDS statement. Where TDS was not deducted but the resident payee has already reported the income and paid tax, Form 26A may help reduce default exposure, though interest may still apply.

For Tax Year 2026-27, businesses should be extra careful because the Income-tax Act, 2025 transition brings updated forms, section references, and [**compliance requirements**](https://busy.in/accounting/taxation-in-accounting-basics-types-of-taxes-and-compliance-essentials/) . Maintaining a monthly TDS checklist, reconciling challans before filing, and issuing certificates on time can help avoid most TDS penalties before they become costly disputes.

## About the author

**Susheel Kumar**

I am a Chartered Accountant with over 20 years of experience and a finance content writer. I focus on educating people about finance and taxation. I have written many blog posts on finance, taxation, trading, and investment on the BUSY website. My goal is to increase financial understanding by making complex concepts easier to grasp and to support educational programs in India.

## Frequently asked questions

### Is the late filing fee and penalty the same thing?

No. The late filing fee is generally the ₹200/day fee for filing the TDS statement late. Penalty is a separate consequence, such as Section 271H penalty for late or incorrect statements. A business may have to pay the late filing fee even where a separate penalty is not finally imposed.

### What should I do if the one-month window for Section 271H relief is missed?

File the pending TDS statement as soon as possible and clear the tax, interest, and late filing fee. Missing the one-month window increases penalty exposure, but the final outcome depends on the facts of the case, notice status, and whether the delay can be reasonably explained.

### Can a wrong PAN in a TDS return be corrected later?

Yes. A wrong PAN can usually be corrected by filing a correction statement. However, the error should be fixed quickly because incorrect deductee details may affect the deductee’s Form 26AS or AIS credit and can also create default notices for the deductor.

### Why is TDS certificate tracking important after return filing?

Because TDS compliance does not end with filing the statement. The deductor must also issue the certificate within the prescribed timeline. A separate reminder helps prevent certificate-related penalty exposure, especially where there are many employees or vendors.

### Does late TDS deposit always mean prosecution?

No. Late deposit first creates interest liability. Prosecution risk depends on the facts, timing, amount, and whether statutory relief applies. Current official guidance also provides that Section 276B shall not apply where the TDS is paid by the due date for filing the relevant TDS statement.

### Can Section 271C apply if TDS was deducted but deposited late?

Generally, no. The Supreme Court has clarified that Section 271C is for failure to deduct TDS. If TDS was deducted but deposited late, the usual consequence is interest and, depending on facts, possible prosecution exposure.

### When should Form 26A be considered?

Form 26A should be considered when TDS was not deducted on a payment to a resident payee, but the payee has already reported that income and paid tax on it. It is not a shortcut for every TDS default, and it should be checked carefully before relying on it.

### Why do old and new TDS forms both matter in FY 2026-27?

Because the applicable form depends on the period for which the statement or correction is being filed. Older periods may still require old forms, while Tax Year 2026-27 filings follow the new form structure. This is why deductors should check the period before selecting the form.

### Are TDS due date extensions automatic?

No. Due date extensions apply only when officially notified. Always check the active Income Tax Department notification or e-filing portal update before assuming that a due date has changed.

## Related articles

- [Form 13 Is Now Form 128: Lower or Nil TDS Certificate Guide](https://busy.in/tds/form-13-is-now-form-128-lower-or-nil-tds-certificate-guide/)
- [Impact of Non-Compliance on TDS Certificate Issuance: 2025 Update](https://busy.in/tds/impact-of-non-compliance-on-tds-certificate-issuance-2025-update/)
- [Section 194R: TDS on Business Perks, Freebies, and Benefits](https://busy.in/tds/section-194r-tds-on-business-perks-freebies-and-benefits/)
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- [Form 12BA: Complete Guide to Salary Perquisites, Applicability, and Tax Implications](https://busy.in/tds/form-12ba-complete-guide-to-salary-perquisites-applicability-and-tax-implications/)
- [Section 194K: TDS on Mutual Fund Dividend and IDCW Income](https://busy.in/tds/section-194k-tds-on-mutual-fund-distributions-demystified/)
- [Income Tax Notice: Key Triggers in TDS Assessments and How Businesses Can Prepare](https://busy.in/tds/income-tax-notice-key-triggers-in-tds-assessments-and-how-businesses-can-prepare/)
- [Importance of TDS in Cash Flow Management for Businesses](https://busy.in/tds/importance-of-tds-in-cash-flow-management-for-businesses/)
- [Section 194DA: Complete Guide to TDS on Insurance Policy Maturity Payouts](https://busy.in/tds/section-194da-complete-guide-to-tds-on-insurance-policy-maturity-payouts/)
- [TDS on Software Purchase in India: A Complete Guide for Businesses](https://busy.in/tds/tds-on-software-purchase-in-india-a-complete-guide-for-businesses/)