Interest on failure to Deduct/Pay TDS/TCS

The Due Date for Depositing TDS/TCS for the month is the 7th of next month. Please Note that the due date for depositing TDS for the month of March is 31st May. If you don’t Deposit the same on the due date, Interest is Applicable.

Let’s see what interest rates are applicable on late deposits of TDS/TCS.

Interest is payable in respect of any of the following defaults in case of TDS:

1. If the person responsible for deducting tax at source does not deduct tax at source wholly or partly under 192 to 196C.

1% per month or part – From the date on which tax was deductible to the date on which tax is actually deducted.

2. After deducting tax, he fails to pay the same as required by the Act.

1.5% per month or part – From the date on which tax was actually deducted to the date on which tax is actually paid.

For Example, Mr. X made a payment to a professional on 30th April 2024, of Rs. 1 Lakh without deducting TDS u/s 194J. He Deducted the same on 2nd May and paid the same on 8th June. In this case, Interest applicability will be as follows:

1% for 2 months April and May and 1.5% for June.

Interest is payable in respect of any of the following defaults in the case of TCS:

1. If the person fails to collect TCS: 1% per month or part – From the date on which tax was required to be collected to the date on which tax is actually collected.

2. After collection tax, the taxpayer fails to pay the same as required by the Act.

1% per month or part – From the date on which tax was actually collected to the date on which tax is actually paid. [Applicable up to March 31st, 2025]

Update by Finance Act 2024: With effect from 1st April 2025, interest @ 1.5% is applicable, if, after collection tax, the Taxpayer fails to pay the same as required by the Act. The same was done to bring the TCS provisions in Line with TDS Provisions.