Interest for default in deduction or deposit of TDS
Where any person responsible for deducting tax at source fails to deduct tax or after deducting fails to deposit the same, he shall be treated as assessee-in-default. In that case, interest under Section 201 will be applicable.
Interest for default in deduction of TDS
If the deductor fails to deduct tax, he shall be liable to pay interest at the rate of 1% for every month or part thereof on the amount of tax he failed to deduct. The interest shall be calculated for the period starting from the date on which tax was required to be deducted and ending on the date on which tax is deducted.
Example : So if say Professional Fees is of Rs 2 Lakh dated 23rd November 2023 and TDS is deducted on 02nd January 2024 , than there is a delay in TDS for three months i.e November , December and January and will be required to pay delay interest of 1% for every month.
It is important to understand that delay is not counted in days but is counted in months and thus in above example TDS for whole month for November , December and even January (even if it is only of 2 days) is payable
Interest for default in deposit of TDS
If the deductor after having deducted the tax, fails to deposit the same to the credit of the Central Government, he shall be liable to pay interest at the rate of 1.5% for every month or part thereof on the amount of tax he failed to deposit to the credit of the Central Govt. The interest shall be calculated for the period starting from the date on which tax is deducted and ending on the date on which such tax is actually deposited.
Example : So if say Professional Fees is of Rs 2 Lakh dated 23rd November 2023 and TDS is deducted but not paid to Government within due date of 07th December. TDS is paid on 15th December 2023 , than there is a delay in TDS for two months i.e November and December.
It is important to understand that delay is not counted in days but is counted in months. Also TDS delay is not counted from due date but it is counted from the date of deduction only. Thus in above example TDS for whole month for November and December is counted and interest of 3% (1.5% for each month is payable).
Interest for default in collection or deposit of TCS
Where any person responsible for collecting tax at source fails to collect the tax or after collecting fails to deposit the same, he shall be treated as assessee-in-default and liable to pay interest as per Section 206C.
If the collector fails to collect or after collection fails to pay it to the credit of the Central Government, interest at the rate of 1% per month or part of the month shall be applicable, till such failure continues. The interest shall be calculated for the period starting from the date on which tax was required to be collected and ending on the date on which tax is deposited.
Fee for default in Filing TDS or TCS Return
Where a person fails to furnish a TDS Statement or TCS Statement on or before the due date, he shall be liable for payment of fees under Section 234E. The fee for default in furnishing the TDS/TCS Statement shall be levied at the rate of Rs. 200 per day during which such failure continues. However, the amount of fee shall not exceed the total amount deductible or collectible, as the case may be.
To read about interest on delay payment of income tax or advance tax please read here
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