Yes, TDS remittance delayed by a day may cost the deductor up to 3%. So next time, as a deductor if you are not serious about the due date for TDS remittance, just think about this.
Due date for TDS remittance
Ø Where the amount is credited or paid during the month of March – Due date 30th April.
Ø Other cases – within 7 days from the end of the month in which the deduction is made.
What if the above deadline is missed?
According to Section 201(1A) which is amended by Finance Act, 2010(effective from 01-07-2010):
“Without prejudice to the provisions of sub-section (1), if any such person, principal officer or company as is referred to in that sub-section does not deduct the whole or any part of the tax or after deducting fails to pay the tax as required by or under this Act, he or it shall be liable to pay simple interest,—
(i) at 1% for every month or part of a month on the amount of such tax from the date on which such tax was deductible to the date on which such tax is deducted; and
(ii) at 1.5% for every month or part of a month on the amount of such tax from the date on which such tax was deducted to the date on which such tax is actually paid,
and such interest shall be paid before furnishing the statement in accordance with the provisions of sub-section (3) of section 200”
So, as per the above section, if the tax was deducted, but was not remitted within the due date, interest will be applicable : from the date of deduction to the date of actual payment of TDS.
Relevant Points
1. Interest @ 1.5% will be applicable from the date of deduction till such amount is actually paid and for every month or part thereof. While calculating the period for interest, the period prescribed for making the payment (i.e period up to the due date) cannot be excluded.
2. This interest liability is absolute and should be deposited through self assessment; and the AO or any other Authority cannot waive off such liability for any reason.
3. While calculating the interest, the defaulted TDS amount shall be rounded off to the nearest multiple of 100, any fraction thereof may be ignored.
How 3% interest for a delay of 1 day?
Now, consider an example. Tax was deducted on certain payment made on 05-07-2010. As mentioned above, the due date for payment of this amount to the credit of Central Govt. is 07-08-2010, but the deductor makes the payment on 08-08-2010. Now, interest will be applicable not after the default, but from the date of deduction, which is 05-07-2010 and while calculating the period for interest, the period prescribed for making the payment to the Govt. cannot be excluded. So, applicable interest will be :
From 05-07-2010 to 04-08-2010 – 1 Month
From 05-08-2010 to 08-08-2010 – part of the month, to be considered as full month.
Thus, interest for 2 months @ 1.5% per month will be 3% and a delay of 1 day in remittance of TDS has resulted in payment of 3% interest by the deductor!!!
1 comment:
I feel that interest should not be calculated on calendar basis. If we see Rule 119A of Income Tax Rules, we need to compute interest in two ways. Namely:
1. Where interest needs to be computed for a month or part of the month, and
2. Where interest needs to be computed based on calendar month.
Sec 201(1A) uses the words month or part of the month. So i am of the opinion that if payment is made on 08-08-2010 interest will be from 05-07-2010 to 31-07-2010 and from 01-08-2010 to 08-08-2010, which is two months.
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