Interest to be charged for failure to deduct and pay TDS – Section 201(1A)

As per the provisions of income tax act 1961, an assesse is required to deduct tax at source for certain specific payments under section 192 to 196C if conditions as laid down in those relevant sections are satisfied.

Interest to be paid for failure in deducting and payment of TDS – Section 201(1A)

For example as per section 194C of Income Tax Act 1961, TDS has to be deducted from payments to contractor if such payment is more than Rs 75000 for a year or a single payment is more than Rs 30000. Similarly, we have section 194J, 194I to which TDS provision is applicable.

Now the question is what will happen when such TDS to be deducted at source has not been deducted or deducted but not paid.

As per section 201(1A) of income tax act 1961, if a person;

  • required to deduct tax at source does not deduct the whole amount or any part of the tax, or
  • after deducting, fails to deposit the tax as required

then the person responsible for deducing TDS shall be liable to pay simple interest at the rate of 1% per month or part of the month on the amount of such tax from the date on which such tax was deductible to the date on which such tax is actually paid.

Such interest shall be paid on or before furnishing the TDS statement for each quarter.

Liability of interest under section 201(1A) of income tax act 1961 will continue to accrue till the tax as well as the interest till date is paid.

Quarterly return of TDS cannot be submitted before payment of interest for late deposit of tax deducted at source.

Editorial Staff at Yourfinancebook is a team of finance professionals. The team has more than a decade experience in taxation and personal finance.

2 thoughts on “Interest to be charged for failure to deduct and pay TDS – Section 201(1A)”

  1. Hi
    I sandip singh, finance manager of kolkata… we are online food delivery co like Zomato & Food, we do have tie up with restaurants, 1 restaurant is there who is saying that he will deduct TDS u/s 194C since we will collect commission from them @ 2% since we are private ltd co.
    My question is threshold limit is 75000, and we will start our operation from 1.12.2015, we are sure that we wil get commission more than 75000 for this year-15-16… My question is from when he will dedcut TDS from the day 1 or from the date when total commission exceeds Rs 75000…..RESTAURANT is saying that they will deduct from day 1, date of start of commission…please suggest asap…

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