Why is it beneficial to Deposit TDS before 30th June despite an extension of TDS Return Due date?

As we all know that the government has extended the due date of Quarter 4 of FY 2019-20 to 31st July 2020.

But it doesn’t mean Due date to Deposit TDS with interest rate at 9% p.a. (0.75% per month or part of the month) on late payment. Rather after 30th June Interest on late payment of TDS will get back to the original i.e. 18% p.a. (1.5% per month or part of the month).

Let’s analyse the consequence of depositing TDS after 30th June 2020 by taking example as follows-

TDS liability to be Deposited for March 2020- Rs. 5,00,000

Particulars TDS Deposited By 30th June TDS Deposited by 31st July
A TDS amount to be deposited Rs. 5 Lakhs Rs. 5 Lakhs
B Months by which late deposited 3 months 5 months
C Rate per month 0.75% 1.5%
D Interest on late deposit (A*B*C) Rs. 11250 Rs. 37500
E Impact of not depositing TDS by 30th June Rs.  26250

If you just delay in deposit of TDS by 1 month then you have to pay 3 times the interest which you will have paid if you have deposited before 30th June.

There is an increase in Interest on late deposit of TDS by Rs. 26250 is due to following reasons

1. Interest Rate change on late deposit from 0.75% to 1.5 % per month or part of the month after 30th June

2. Period of Delay Change

  • As per ordinance of 31.03.2020- the period of delay means the period between the due date and the date on which the amount has been paid i.e. from 30th April to date on which amount has been paid
  • As per regular provisions– the period of delay means from the date of deduction to the date of payment i.e. march 2020 to date on which amount has been paid

Hence, it’s advisable to get TDS deposited before 30th June otherwise due to just 1 month you will be liable to pay so much interest on late deposit which also gets disallowed while computing taxable income under income tax.

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