Each e-TDS statement is processed by TIN and defaults are put on web site for deductors to rectify.
In this article, we will examine what is default on account of interest and how it can be avoided
When is interest payable ?
As per income-tax , interest is payable under the following two circumstances
- Tax is not deducted , when it was deductible
- Tax once deducted, is not paid on or before due date
When tax is to be deducted
| At the time of credit or payment, whichever is earlier |
| 193- Interest on securities |
| 194A- Interest Other than “Interest on securities” |
| 194C- Payment to contractors / sub contractors |
| 194D – Insurance commission |
| 194H – Commission or Brokerage |
| 194G- Commission on sale of lottery tickets |
| 194I- Rent |
| 194J- Professional or technical fees |
| Before making payment or distribution |
| 194- Dividend |
| At the time of payment |
| 192- Salaries |
| 194B- Winning from lotteries / crossword puzzles |
| 194BB Winnings from horse races |
| 194EE – Payment from National Saving Scheme |
| 194F Payment for repurchase of units by UTI / mutual funds |
| 194LA: Payment of compensation on acquisition of certain immovable property |
What is the Due date of deposit of TDS ?
- All the TDS deductions made during a month are to be paid on or before7th of the next month. Example : All deductions made during April ,must be paid on or before May 7th, 2010.In case 7th of the month happens to be a Sunday or a bank holiday, then the payment can be made on the next business day.
- Beginning FY 2010-11 ,for deductions made during the month of March, payment must be made on or before 30th April.
What is the rate of interest ?
W.e.f 01-07-2010
- From the date when TDS was deductible till date of actual deduction,rate of interest is 1% p.m.
- For delayed deposit, from date of deduction till actual date of payment, rate of interest is 1.5% p.m
Prior to 01-07-2010
- From FY 2006-07 onwards for delayed deposit, from date of deduction till actual date of payment, rate of interest is 1.0% p.m
What is the due date of payment of interest ?
Interest must be calculated and paid before filing of eTDS statement of the quarter.
| Quarter 1 | Jul-15 |
| Quarter 2 | Oct-15 |
| Quarter 3 | Jan-15 |
| Quarter 4 | May-15 |
How is interest to be calculated ?
- Interest is to be calculated for every month or part of a month comprised
in a period, any fraction of a month shall be deemed to be a full month - The amount of tax, penalty or other sum in respect of which such interest
is to be calculated shall be rounded off to the nearest multiple of one
hundred rupees and for this purpose any fraction of one hundred rupees
shall be ignored and the amount so rounded off shall be deemed to be the
amount in respect of which the interest is to be calculated.
Of course, those using TdsPac software from Fast Facts need not worry. Automatic and accurate calculation of interest is available in single click.
Example of Interest Calculation
| Date Of Payment | Date of Deduction | Due Date | Date of Deposit | Delayed Deposit | Delayed Deduction | ||
| Months | Rate | Months | Rate | ||||
| 05/04/2010 | 05/04/2010 | 07/05/2010 | 09/05/2010 | 2 | 1% | - | - |
| 10/04/2010 | 10/04/2010 | 07/05/2010 | 09/05/2010 | 1 | 1% | - | - |
| 02/07/2010 | 04/08/2010 | 07/09/2010 | 07/09/2010 | - | - | 2 | 1% |
| 02/07/2010 | 04/08/2010 | 07/09/2010 | 15/09/2010 | 2 | 1.50% | 2 | 1% |
Avoiding Interest Default
To avoid interest default
- Deduct tax at source in time
- Deposit TDS by due date
- In case of delayed deduction / deposit ,calculate interest and deposit the same
- Show such interest properly in eTDS statement
Rectifying Interest Default
- You may download default notices after logging into your TAN account.
- Default Notice is a plain excel sheet without any password protection
- If there is any default on account of non-payment or short payment of interest, you need to pay up the same
- After paying , you have to file correction statement by including the interest payment challan.