Interest on Delay in TDS / TCS

Interest on late TDS is 1% a month from when tax was due to be deducted until it is deducted, and 1.5% a month from deduction until deposit if deposited late, under section 201(1A) (section 398 of the 2025 Act). Part of a month counts as a full month. A late quarterly statement adds ₹200 a day under section 234E (section 427), capped at the tax amount.

1. The deduction date fixes the due dates: deposit by the 7th of the next month (30 April for tax deducted in March) and the quarterly statement by 31 July, 31 October, 31 January or 31 May.
2. Tax deducted after the date it was due to be deducted (the earlier of credit or payment) carries interest of 1% a month for each month or part of a month in between.
3. Tax deposited after the deposit due date carries interest of 1.5% a month, counted from the month of deduction to the month of deposit.
4. A statement filed after its due date carries a fee of ₹200 for each day of delay, capped at the tax amount.
5. For tax deducted up to 31 March 2026 the interest falls under section 201(1A) and the fee under section 234E of the 1961 Act; from 1 April 2026 they fall under sections 398 and 427 of the Income-tax Act 2025.

Mehta Traders had to deduct ₹40,000 of TDS on a fee credited on 20 April 2026, but deducted it only on 15 May 2026. It deposited the tax on 10 August 2026 and filed the April–June statement on 9 September 2026.

1. Deducted late: 1% × 2 months (April and May) on ₹40,000 = ₹800.
2. Deposit was due by 7 Jun 2026, so the deposit on 10 Aug 2026 is late.
3. Deposited late: 1.5% × 4 months (May to August) on ₹40,000 = ₹2,400.
4. Statement was due by 31 Jul 2026; filed 40 days late at ₹200 a day = ₹8,000.
5. Interest under section 398: ₹800 + ₹2,400 = ₹3,200; with the section 427 fee, the total is ₹11,200.

Mehta Traders owes ₹11,200 on top of the ₹40,000 TDS: ₹3,200 of interest and an ₹8,000 late fee.

Interest for late deposit of TDS is 1.5% per month on the tax, under section 201(1A) of the 1961 Act or section 398 of the Income-tax Act 2025. Once the deposit misses its due date, interest runs from the month of deduction to the month of deposit, and part of a month counts as a full month.

Interest for late deduction of TDS is 1% per month on the tax, from the date it was due to be deducted until the date it was actually deducted. Tax is due to be deducted on the earlier of credit or payment, and part of a month counts as a full month.

It is counted from the date of deduction, not the due date. TDS deducted on 15 May 2026 and deposited on 10 August 2026, after its 7 June due date, is charged 1.5% a month for 4 months: May, June, July and August.

The late fee is ₹200 for each day of delay under section 234E, or section 427 of the Income-tax Act 2025, capped at the tax amount. A statement filed 40 days late costs ₹8,000, or the tax amount if that is lower.

Section 398 of the Income-tax Act 2025 sets interest for late deduction or deposit of TDS: 1% per month if deducted late and 1.5% per month if deposited late, with part of a month counted as a full month. It takes the place of section 201(1A) for tax deducted from 1 April 2026.