TDS - LATE DEPOSIT TDS -PAY INTEREST 1.5 % PM

The Finance Bill proposes to create a separate class of default in respect of tax deducted but not paid to levy interest at a higher rate of 1.5 per cent per month, i.e. 18 per cent p.a. as against 1 per cent p.m., i.e. 12 per cent p.a., applicable in case the tax is deducted late after the due date. The rationale behind this amendment is that the tax once deducted belongs to the government and the person withholding the same needs to be penalized by charging higher rate of interest.

It may further be noted that the benefit of the proposed amendment under the Section 40a(ia) of making the payment before the due date offiling the return shall be available only in those cases where tax has been deducted during the previous year but paid after the end of the previous year and before the due date of filingthe return. Accordingly, all such persons in terms of the Section 201(1A) need to pay a higher rate of interest, i.e. 18 per cent, from the date of deduction of tax till the date it is actually paid before furnishing the statement under the Section 200(3) of the Act.In case any person claims that tax has been deducted after the end of the previous year and hence a higher interest rate of 18 per cent is not applicable, such a person will not be eligible for the benefit of the proposed amendment to the Section 40a(ia), as this benefit is available only when the tax has been deducted during the previous year itself. So pay your TDS deduction on time ,otherwise you have to bear heavy interest cost. Summary of New provision

Interest up to 30.06.2010

• For late deduction of Tax deduction at source-(rate 1 % per month or part thereof)
• For late deposit of TDS after deduction (rate 1 % per month or part thereof)

Interest from 01.07.2010

• For late deduction of Tax deduction at source-(period date from tax deductible to date of actual deduction )(rate 1 % per month or part thereof)
• For late deposit of TDS after deduction (period :date from tax deducted and date of actual deposit)(rate 1.5 % per month or part thereof)
• http://www.simpletaxindia.org/2010/04/late-deposit-tds-pay-interest-15-pm.html