Payment of Interest on Late Deduction of TDS or Late Deposit of TDS [Section 201 (1A) and (2)]

Friday, November 18, 2011 | comments

Besides the above penalty, if any such person, principal officer or company does not deductor whole or 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 as under :-

Period of Defaults
Rate of Interest
(a)
From the date the tax was deductible to the date on which such tax id deducted
1% p.m. or part of the month
(b)
From the date on which such tax is deducted to the date on which such tax is actually paid
1.5% p.m. or part of the month

Example
S.No.
Nature of Exp.
Date of Payment/
Credit
Date of Deduction of Tax
Date of Deposit of Tax
Rate of Interest
Period for which it’s payable
1
Payment to Contractor
16-08-2010
31-03-2011
31-07-2011
1%



1.5%


From 16-08-10 to 31-03-11 i.e. for 8 months

From 01-04-11 to 31.07.11 i.e. for 4months
2
Payment to Contractor
16-08-2010
16-08-2010
31-07-2011
1.5%
From 16.08.10 to 31.07.11 i.e. for 12 months
3
Payment to Contractor
16-08-2010
30-04-2011
30-09-2011
1%



1.5%
From 16.08.10 to 30.04.11 i.e. 9 months

From 01.05.11 to 30.09.11 i.e. 5 months
4
Rent
31-03-2011
31-03-2011
30-04-2011
No Interest payable as tax has been within the due date.
  
            Further the amount of tax deducted together with interest for delayed payment shall be a charge upon all the assets or the person or the company as the as may be. 

            Where the assessee failed to deduct tax under section 194C, but it was found that the contractor had paid the advance tax and self-assessment tax over and above the tax payable, thereby not causing any loss to the revenue,  if the revenue is permitted to levy interest under section 201(1A) even in a case where the person liable to tax has paid tax on due date, the revenue would derive undue benefit by getting interest on the amount of tax which had already been paid on the due date.  Such a position cannot be permitted. 

          Interest leviable even if tax has been paid by the deductee;  Where the tax has been paid by the deductee-assessee, tax can not be incomes from the deductor,  but interest under section 201(1A) shall be payable by the deductor till the date of payment of tax by the deductee-assessee.



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