1. Introduction: This article covers the computation of interest in cases of late payment of TCS, as defined under Section 206C of the Income Tax Act.
2. Rate of interest:- If TCs is collected but not deposited on time then interest liability will arise @1.5% per month or part thereof.
Note: The earlier rate was 1%. From 1st April 2025, it has been increased to 1.5%.
3. Period for calculation:
- From the date on which TCs was collected till the actual date of payment.
- Suppose, TCs for the month of April is collected on 30th April, but deposited on 10th June then interest will be levied from April to June.
4. Principal amount:- Interest will be levied on TCs amount instead the amount on which TCs was collected.
5. Rounding up:- For interest calculation, part of month shall be considered as full month.
6. Example 1:-
| S. No. | Particulars | Amount |
| 1 | TCs liability | 1,00,000 |
| 2 | Liability for collection of TCs | In April month |
| 3 | Actually collected | In April month |
| 4 | Due date of payment | 7th May |
| 5 | Actual date of payment | 10th June |
| 6 | Interest rate | 1.5 % |
| 7 | Liability of interest | 4,500 ** |
** Interest for late payment of TCs: 1,00,000 * 1.5% * 3 months = 4,500
Example 2:-
| S. No. | Particulars | Amount |
| 1 | TCs liability | 1,00,000 |
| 2 | Liability for collection of TCs | In April month |
| 3 | Actually collected | In May month |
| 4 | Due date of payment | 7th June |
| 5 | Actual date of payment | 10th June |
| 6 | Interest rate | 1.5 % |
| 7 | Liability of interest | 5,000 ** |
** Interest for late payment of TCs: 1,00,000 * 1.5% * 2 months = 3,000.
** Interest for late collection of TCs: 1,00,000 * 1% * 2 months = 2,000.
7. Time period:-
- A month will be considered as a calendar month.
- A month will not be calculated based on the number of days for interest calculation.
8. Practical scenario:-
| S. No. | Actual date of collection | Due date of payment | Actual date of payment | Period for interest calculation |
| 1 | 15-04-2025 | 07-05-2025 | 05-05-2025 | 0 month |
| 2 | 15-04-2025 | 07-05-2025 | 07-05-2025 | 0 month |
| 3 | 15-04-2025 | 07-05-2025 | 08-05-2025 | 2 month |
| 4 | 15-04-2025 | 07-05-2025 | 31-05-2025 | 2 month |
| 5 | 15-04-2025 | 07-05-2025 | 07-06-2025 | 3 month |
| 6 | 15-04-2025 | 07-05-2025 | 30-06-2025 | 3 month |
Note: Interest will be charged from the date of collection instead from the due date of payment.
9. Allowance or disallowance of interest:- Interest is disallowed under Income Tax Act. Assessee cannot claim such interest as an expense.
10. Deferred tax on interest:- It is a type of permanent difference. Hence, no deferred tax is created on interest.
11. Sentence copy from Bare Act:
(A) Without prejudice to the provisions of sub-section (6), if the person responsible for collecting tax does not collect the tax or after collecting the tax fails to pay it as required under this section, he shall be liable to pay simple interest—
| (a) | at the rate of one per cent for every month or part thereof on the amount of such tax from the date on which such tax was collectible to the date on which such tax is collected; and | |
| (b) | at the rate of one and one-half per cent for every month or part thereof on the amount of such tax from the date on which such tax was collected to the date on which such tax is actually paid,
and such interest shall be paid before furnishing the quarterly statement for each quarter in accordance with the provisions of sub-section (3): |
Provided that in case any person responsible for collecting tax in accordance with the provisions of this section, fails to collect the whole or any part of the tax on the amount received from a buyer or licensee or lessee or on the amount debited to the account of the buyer or licensee or lessee but is not deemed to be an assessee in default under the first proviso of sub-section (6A), the interest shall be payable from the date on which such tax was collectible to the date of furnishing of return of income by such buyer or licensee or lessee:
Provided further that where an order is made by the Assessing Officer for the default under sub-section (6A), the interest shall be paid by the person in accordance with such order.
12.Refer to the article: Interest on late payment of TDS
https://taxguru.in/income-tax/section-201-1a-interest-late-payment-tds.html
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