TDS Late Payment Interest Calculator

What is TDS Late Payment Interest under Section 201(1A)?

Under the Income Tax Act, 1961, every person responsible for deducting tax at source (TDS) must deposit the deducted amount to the government within the prescribed due date. Failure to do so attracts interest under Section 201(1A) — one of the most common compliance notices received by corporate finance teams and accounts departments across India.

The interest liability arises in two situations: first, when TDS is deducted from a payment but not deposited to the government on time; and second, when TDS was not deducted at all even though it was required. The rates are different for both situations.

Interest rates under Section 201(1A)

• 1% per month — when TDS has been deducted but not deposited to the government within the due date. Interest is calculated from the date of deduction to the date of actual payment.
• 1.5% per month — when TDS was not deducted at all. In this case, interest is calculated from the date on which TDS was deductible (date of payment or credit, whichever is earlier) to the date of actual deposit.

Importantly, even a single day into a new month is counted as a complete month for the purpose of this calculation. A 32-day delay is treated as 2 full months of interest.

How to calculate TDS late payment interest — step by step

1. Identify the TDS section — 194C for contractor payments, 194J for professional fees, 194I for rent, 194Q for purchase of goods, 192 for salary, etc.
2. Determine the TDS amount — multiply the transaction amount by the applicable TDS rate. If PAN is not available, the rate is 20% under Section 206AA.
3. Find the due date — 7th of the following month for most sections; 30th April for deductions in March.
4. Count the delay — calculate the number of days from the due date (or deduction date, whichever is earlier) to the actual payment date.
5. Round up to months — convert days to months, rounding any partial month up to a full month.
6. Apply the rate — multiply TDS amount × interest rate (1% or 1.5%) × number of months.

TDS due dates and rates quick reference

Consequences of TDS default beyond Section 201(1A) interest

While interest under Section 201(1A) is the most immediate cost of TDS non-compliance, it is not the only one. Corporate finance teams should also be aware of:

• Penalty u/s 271C — equal to the amount of TDS not deducted or not paid, at the discretion of the Joint Commissioner
• Disallowance u/s 40(a)(ia) — 30% of the payment amount is disallowed as a business expense if TDS was not deducted
• Prosecution u/s 276B — rigorous imprisonment of 3 months to 7 years for wilful failure to deposit TDS
• Late filing fee u/s 234E — ₹200 per day of delay in filing TDS returns, subject to a maximum of the TDS amount

Using a reliable, NSDL-authorised online TDS software with automated due-date reminders eliminates all of these risks for your organisation.