Wednesday, January 26, 2011

Delay in TDS Remittance Even a Day- Interest up to 3%!

Delay in TDS Remittance Even a Day- Interest up to 3%!

Sometimes people forget about discharging their TDS on time and this result in attraction of interest and that to @ 3% for a single day delay. The fact itself proves that how fragile things can be when it comes to timely remittance of TDS. TDS needs to be submitted within seven days from the end month on which such deduction was made and whereas the amount was paid or credited in the month of March, the due date is till 30th April. Thus one needs to be very attentive and consistent regarding timely payment of TDS and needs to be punctual in such respect.


The amended Finance Act, 2010 had certain explanation and clarification to make in this regard and by the virtue of the Section 201(1A) which shall be effective from 1st July 2010, it furnished that:

“Without prejudice to the provisions of sub-section (1), if any such person, principal officer or company as is referred to in that sub-section does not deduct the whole or any part of the tax or after deducting fails to pay the tax as required by or under this Act, he or it shall be liable to pay simple interest,—
at 1% for every month or part of a 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
at 1.5% 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, and such interest shall be paid before furnishing the statement in accordance with the provisions of sub-section (3) of section 200”

So, in context with the above it is clear that the interest chargeable on due TDS will be computed from the date on which the deduction was made and not from the due date for such deduction. Due TDS here means that the TDS was collected from an individual but was not remitted within the time period as specified by the Finance Act. Thus, certain observations can be made out of this issue and are listed below:
Computation of TDS is on self assessment basis where an individual is required to compute his payable TDS by himself.
While computing the interest for the delay in remittance of TDS, full month’s interest needs to be charged irrespective of the date, i.e. even if payment is made in middle of a month, interest needs to be paid for the full month.
Interest per month is @ 1.5%.
Computation of interest shall be rounded off to the nearest 100 and any fraction may be ignored.

Let’s take an example to make things even clearer. Suppose tax was deducted on 5th August 2010. Therefore the due date for remittance of such TDS is 7th September 2010. Now if the assessee fails to pay the remittance on 7th and pays on 8th of September, he will be paying 3% interest thereon. As the condition said interest is charged from the day TDS was collected and any fraction for month will be taken as a full month. So, 1.5 + 1.5 =3% interest!! Thus, it is ultimately proved that a day’s delay in remittance of TDS can be as costly as up to 3% of the TDS.


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