TDS, tax deducted at source, is the collection of tax from the very source of income. The person liable to make payment to another person shall deduct the tax at the source. Later, that amount gets remitted to the Central Government. The following article provides information regarding the dates on which TDS needs to be paid and the penalty, prosecution, and interest on late payment of TDS.
TDS is payable to the Central Government in two ways- E-payment or submit Challan No.281 in the authorized bank branch.
TDS payment due dates
- The due date in case of TDS on sale of immovable property or TDS from rent by individual or HUF is collected on the 30th of that month. For example, if TDS is deducted on the sale of a house on 15th June 2021. The person will pay TDS on or before 30th June 2021.
- Moreover, if the payment of TDS is on a Sunday or a public holiday, then the next working day will be considered the last day for paying TDS to the government.
- Additionally, when one makes a payment through online mode, the payment done after 8 PM gets processed on the next day. For instance, one pays TDS via electronic mode on 7th May at 10 PM for April. Then, in this case, the payment gets processed on 8th Hence, the person will have to pay interest on the late payment of TDS.
Interest on late payment of TDS
Under Section 201 (1A) (i), a person is liable to pay 1% interest per month for non-deduction of TDS in part or whole. The period is from the date on which tax is deductible to that date on which it gets deducted.
Under Section 201 (1A) (ii), a person is liable to pay 1.5% per month as interest on late payment of TDS after deduction in part or whole. The period is from the date of deduction to the date of payment.
Importantly, the period gets calculated on monthly basis and not on the number of days. Hence, part of a month is considered a full month.
Examples of Interest on late payment of TDS
For instance, Mr X has to deduct a TDS of ₹10,000 in April 2021. He is liable to pay this amount to the Central Government by 7th May 2021. But he fails to deduct TDS by 7th May. He deducts it on 15th August 2021. Here, the person fails to deduct TDS and is liable is pay an interest of 1% for every month or a part of a month.
The number of months will be from the date on which tax is deductible to that date on which it gets deducted.
Amount of TDS= ₹10,000
Rate of interest= 1%
Number of Months= 5 (April to August)
Therefore, interest for non-deduction of TDS= 10,000* 1% *5 months
Another example, Mr A has to deduct a TDS of ₹10,000 for January 2020. He is liable to pay this amount to Central Government by 7th February 2020. But he deducts the TDS on 10th January 2020 but fails to pay till 7th February. He pays it on 15th August 2020.
The number of months is from the date of deduction to the date of payment.
Amount of TDS= ₹10,000
Rate of interest= 1.5%
Number of Months= 8 (January to August)
Therefore, interest on late payment of TDS= 10,000* 1.5% *8 months
Fee for late filing
As per Section 234E, a fine of ₹200 per day until a TDS return is filed. The fee shall not exceed the amount of TDS. The person shall pay the fee every day of delay with a maximum limit of fine which equals the TDS amount.
For instance, the TDS amount payable as of 1st March 2021 was ₹5,000. But one files returns on 30th June instead of 31st March 2021. The delay period is of 60 days. The calculation comes out as 60*200= ₹12,000. But the maximum limit is ₹5,000 (actual TDS amount). Hence, the fee for late filing is ₹5,000.
If the person files TDS after 2 days, then the fee amounts to ₹400. Here, the person is liable to pay only ₹400 i.e., till TDS gets filed.
In addition to this, one is liable to pay interest for delay in deposit of TDS.
As per Section 271H, the assessing officer may ask the person who failed to file TDS within the due date with a minimum penalty of ₹10,000 which can extend up to ₹1,00,000. The penalty is in addition to the fee in Section 234E. This section also covers the cases of filing incorrect TDS returns.
No penalty gets levied under this section if the following conditions are satisfied:
- If one pays TDS to the Central Government
- A late filing fee or interest (if any) is paid to the government.
- If one files a TDS return before the expiry of the period of one year.
A prosecution gets initiated if a person fails to pay the TDS amount to the Central Government. The rigorous imprisonment is for a minimum of 3 months which can extend up to 7 years with a fine.
Recent updates regarding TDS compliances
- Under Section 194S, in case of payment for the transfer of virtual assets to a resident TDS of 1% gets deducted. Also, in case the payments are
- wholly in kind or exchange for another virtual asset or partly in cash
- partly in cash or partly in kind. But if the cash amount is sufficient enough to meet the liability of deduction, then the payer shall ensure that TDS is paid in respect of such consideration.
- As per Section 194-IA, a person buying property shall deduct TDS of 1% on the sum paid or the stamp duty value of the property, whichever is higher.
- Under Section 194R, a person who provides perks or benefits, whether convertible to cash or not, to any resident carrying out business or profession shall deduct a TDS of 10%.
- Moreover, during the COVID-19 lockdown, the government waived all the penalty provisions between 20th March 2020 to 30th June 2020.