• Apr
  • 26
  • 2012

How to rectify, calculate & aviod interest on TDS defaults

How to rectify and avoid interest default in Payment of TDS and 

Income Tax Department  displaying defaults in TDS returns filed  on its website www.tin-nsdl.com (TAN registration login). The defaults will be raised as & when processed and will be kept updated in this area. It will be in a Zipped Excel sheet (no password) and quarter wise separate files will be available. (for which defaults are identified).

It is observed that most of the Assessee default on payment of TDS which results in payment of interest, penalty and may also lead to criminal prosecution.  Read our Article – Consequences for Non Payment or Late Payment of TDS  . In this article we are discussing what is the rate of interest which Assessee may have to pay for delayed payment of TDS, when this interest becomes payable, what is the due date of tds payment, when tds needs to be deducted, how to calculate interest on TDS, Example of Interest Calculation, how to avoid and rectify interest default. 

When is interest payable ?

As per income-tax , interest is payable under the following two circumstances

  1. Tax is not deducted , when it was deductible
  2. Tax once deducted, is not paid on or before  due date

When tax is to be deducted - TDS on all types of payments on which TDS is applicable  is required to be deducted, at the time of credit or payment, whichever is earlier.

What is the Due date of deposit of TDS ?

The Tax deducted at source in accordance with the provisions of Chapter XVII-B of the Income tax Act, 1961 by deductors other than an office of the Government shall be paid to the credit of the Central Government -

  (i)  on or before 30th day of April where the income or amount is credited or paid in the month of March; and

 (ii)  in any other case, on or before seven days from the end of the month in which the deduction is made; or income-tax is due under sub-section (1A) of section 192.

What is the rate of interest ?

If a person fails to deduct the whole or any part of the tax at source, or, after deducting, fails to pay the whole or any part of the tax to the credit of the Central Government within the prescribed time, he shall be liable to action in accordance with the provisions of section 201. Sub-section (1A) of section 201 lays down that such person shall be liable to pay simple interest

Interest Rate w.e.f 01-07-2010

(i) at one percent for every month or part of the 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 one and one-half percent 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. Such interest, if chargeable, has to be paid before furnishing of quarterly statement of TDS for each quarter.

Interest Rate Prior to 01-07-2010

(i) 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. In Other words Prior to 01.07.2010 there was no interest payable for the period of delay in deduction of TDS.

Example of Interest Calculation

Date Of Payment Date of Deduction Due Date Date of Deposit Delayed Deposit Delayed Deduction
Months Rate Months Rate

01/04/2010

01/04/2010

07/05/2010

09/05/2010

2

1%

-

-

09/04/2010

09/04/2010

07/05/2010

09/05/2010

1

1%

-

-

01/07/2010

04/08/2010

07/09/2010

07/09/2010

-

-

2

1%

01/07/2010

04/08/2010

07/09/2010

15/09/2010

2

1.50%

2

1%

 

What is the due date of payment  of interest ?

Interest must be calculated and paid before furnishing of quarterly statement of TDS for each quarter.

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.

Avoiding Interest Default- To avoid interest default Assessee needs to do the following:-

  • 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 –

  • To rectify interest default we need to first login to our TAN account.
  • Download default notices  -Default Notice is a plain excel sheet without any password protection
  • Pay the interest as shown in default notice if the same is payable
  • After  payment  file correction statement by including the interest payment challan.

17 Responses to “How to rectify, calculate & aviod interest on TDS defaults”

  1. Ca Sanjay Jain says:

    1. Interest u/s 201 (1A) is being demanded in all the notices for a month based on CALENDAR MONTH . eg
    in case of tax deducted on 31.3.13 deposited on 3rd May 2013 the delay is for 1 month and 4 days , but interest is being demanded for 3 months in all cases . This is not as per Income Tax Rules 1962. This requires immediate attention and rectification of software.
    2. Similarly no Rounding off of demand u/s 288B and Rule 119A by excluding amount in excess of nearest hundred is considered.
    3. Demand notices are being sent even for short deduction of Re 1 although u/s 288B every sum payable under the Act is to be rounded off to nearest Rs 10 .

  2. ramakrishnaraju says:

    Sir

    I am temporary DDO(02.01.2013),(WE ARE PSU) I found now that due to System failure for some of the employees TDS was correctly deducted as both INCOME AND TDS was not reflected and can i issue rvised FORM -16 with all the additions i.e. INCOME to be added and the corresponding deducted TDS. Can I pay THE DIFFERENCE IN TDS NOW TO TDS AUTHORITES WITH THAT AMOUNT(WITHOUT INTEREST).

  3. Bala says:

    what about TDS revised return for lower deduction certificate u/s 197?

  4. R.SRINIVASA SIVA says:

    Dear Sir,

    I have received a default u/s 200A in the justification report interest on late payment Rs.600/- I had made payment under section 194C as interest. I have submit revised return for the particular financial year kindly guide me

    Thanks

    R.Srinivasa Siva

  5. RAO says:

    TDS of Rs.651 short deducted in March,2013 and the short deducted amount Rs.651 deposited in May,2013 along with Interest of Rs.19. Is it enough, or the minimum of Rs.100 to be payable as Interest?

  6. Shailesh Gulati says:

    i am contractor (my real brother Mr. X & Miss. Y is my niece)
    i am deducting TDS u/s 194A of Mr. X for the loan i am using.
    his daughter Miss Y, (minor 5 years) also given amount to me on loan, not having PAN.
    every year Miss Y income is clubbed in income of MR. X.
    this year Miss Y, interest is more than rs. 5000/-
    Plz suggest what to do.
    whether tds is to be deducted or not. if yes then in whose name.

  7. MANOJ SINGHANIA says:

    My account with TIN NSDL is showing locked. Pls tell me how can we unlock the account with TIN NSDL.

  8. MANOJ SINGHANIA says:

    At the time of log in TIN-NSDL site, it show that user account is locked. I have received default notice for 2011-12 for 1st qtr but we are unable to get the details of default.

    pls advise.

  9. gaurav says:

    plz tell me how i calculate intrest on tds….

  10. Jignasha says:

    Pl. guide me

    I want to service tax late payment interest of quarter (April to June -2010) today.

  11. deepak says:

    in fourth example above when due date is 07th sep 2010 and deposit date is 15th sep 2010 than why delay in deposit is 2 months rather than 1 month

  12. mitul says:

    how to rectify uploded TDS challan

  13. mitul says:

    plz sir tell me how to default rectify

  14. nehal says:

    related to default in interest
    we have paid interest default but can not get where to add this interest (should it be added to same colum in correction statement or add new )in default  in correction statement please guide for the same 

  15. Manoj says:

    Sir, Is it necessary to file revised return after paying the interest as per default.  Is it not enough merely informing by email the deposit details to www. tin-nsdl.com. thanks c.s.manoj@gmail.com

  16. Dilip Patel says:

    guys pl. help whether ther is any specific calculator link to calculate the interest on tds default till date of payment. As the default notices show only interest till date of processing.
    pl. help for such calculation.

    Thanks in advance

  17. Pawan says:

    I have received a default for non depositing interest on TDS, I have deposited interest on TDS and make correction in Revise Return and submit it. After That I am still getting Default and mentioned in that Interst on TDS Rs. 600/- and Interest paid thrugh challan 600/- and TOTAL Interest is NIL. What should i do while there is no mistake in Dfaults.
    Please Suggest Me Why Defaluts Receiving again and again
    Thank you

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