How to Calculate interest on delay TDS Payment

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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
illustrations below: 

Case 1:
Q1, Tax Deducted on 26th June, TDS deposited on 9th July (due date was 7th July)
The period of 26th June to 30th June will be calculated as one
month (being part of a month) & from 1st July 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. 

Case 2:
Q4, Tax Deducted on 20th March, TDS deposited on 5th May  (due date was 30th April)
The period of 20th March to 31st March will be calculated as one
month, 1st April to 30th April will be another month
& from 1st May to 5th May 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
months. 
Logic
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.
RECOMMENDED READ  Impact & action to be taken in case of PANs either “Not Available” or “Invalid” in Quarterly TDS statements
Latest Comments
  1. Unknown

    how to calculate tds interest rate

  2. Anonymous

    deducted on 15.01.2016 paid on 02.04.2016 how the interest is calculated. please let me know

  3. Amit Bhilare

    It will be for 4 months

    • Saurabh

      Tax deducted was on 01.07.2015 but will be paying now i.e 17.05.2016. please confirm that I have to make the payment of 11 months??? Also do I have to make interest payment along with the tax payment by form 26QB??

  4. VIJAY CHIKANE

    TDS DEDUCATED AS ON 31ST MARCH2016 IS RS-57500. NOW ON THE DATE 06TH JUNE 2016 WE PAY TDS AMT .
    HOW MANY MONTH WE CHARGES THE INTEREST AMT

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