Sometimes Deductor deposit TDS after the due date without Interest, hence when return processed, demand notice raised by TRACES and penalize heavy interest on late payment. But some Deductor does not know how to calculate Interest on delay TDS Payment.
The interest is to be calculated as per
Q1, Tax Deducted on 26thJune, TDS deposited on 9thJuly (due date was 7thJuly)
The period of 26thJune to 30thJune will be calculated as one
month (being part of a month) & from 1stJuly to 9th July will also be
treated as one month. As such in this case, the interest payable is for two
months. Total interest would be 3%. Sounds odd, but it is true - for a
delay of 2 days, one has to pay interest for two months.
Q4, Tax Deducted on 20thMarch, TDS deposited on 5thMay (due date was 30thApril)
The period of 20thMarch to 31stMarch will be calculated as one
month, 1stApril to 30thApril will be another month
& from 1stMay to 5thMay will be treated as another
one month. As such in this case, the interest payable is for three months.
Total interest would be 4.5%. For a 5 day delay, the interest payable is for 3
behind this calculation is that, if dues are not paid on time, the interest for
each month (or part thereof) is to be paid right from the date of deduction
till date of deposit of the TDS. Each month is treated based on the ‘Calendar
Month’ instead of counting the number of days.