TDS Interest Calculator

The TDS Interest Calculator is an essential tax compliance tool designed to help deductors compute mandatory interest penalties for delayed Tax Deducted at Source (TDS) transactions under Section 201(1A) of the Income Tax Act. When a business or individual fails to deduct TDS on time or delays depositing deducted tax into the central government account, statutory interest penalties accrue automatically.

Whether filing quarterly TDS returns (Form 24Q, 26Q, or 27Q) or rectifying default notices, this calculator applies exact month-count rules and interest percentage rates.

The Section 201(1A) TDS Interest Formula

Statutory interest for TDS defaults is divided into two distinct rules under Section 201(1A):

1. Interest for Late Deduction of TDS

Charged when tax was due for deduction on a payment/credit date but deducted at a later date:

Late Deduction Interest = TDS Amount * 1.0% * Number of Months

Rate: 1.0% per month (or part of a month) from the date tax was deductible to the date tax was actually deducted.

2. Interest for Late Payment / Deposit of TDS

Charged when tax was deducted on time but deposited into the government treasury after the due date:

Late Payment Interest = TDS Amount * 1.5% * Number of Months

Rate: 1.5% per month (or part of a month) from the date of deduction to the date of actual payment into the government bank account.

Crucial Rule: For Section 201(1A) calculations, any fraction or partial calendar month is rounded UP and counted as one full month.

TDS Interest Penalty Benchmark Table

The table below presents interest penalty comparisons across common TDS tax default scenarios for a ₹50,000 TDS Tax Liability:

Step-by-Step TDS Interest Calculation Example

A company deducts TDS of ₹100,000 on April 15th but fails to deposit the tax into the government account by the due date (May 7th). The tax is finally deposited on June 10th.

Step 1: Determine Applicable Interest Rule

Tax was deducted on time (April 15th) but deposited late (June 10th). Therefore, the Late Payment Rate of 1.5% per month applies.

Step 2: Count Applicable Months

• Deduction Month: April (Month 1)
• Interim Month: May (Month 2)
• Deposit Month: June (Month 3)
• Total Months = 3 Months (April, May, and June are counted as full months under Section 201(1A)).

Step 3: Calculate Total Interest Penalty

Interest Penalty = ₹100,000 * 1.5% * 3 months

Interest Penalty = ₹100,000 * 0.015 * 3 = ₹4,500

Result: The deductor must pay ₹4,500 in statutory interest via Challan ITNS 281 alongside the late TDS deposit.

Frequently Asked Questions

What is the monthly due date for depositing TDS to the government?

TDS deducted during any calendar month must be deposited into the government treasury on or before the 7th day of the following month (e.g., April TDS must be deposited by May 7th). An exception applies for March TDS, which can be deposited up to April 30th.

Is interest paid under Section 201(1A) tax-deductible as a business expense?

No. Interest paid for late deduction or late deposit of TDS under Section 201(1A) is treated as a penal tax levy and is disallowed as a deductible expense under Section 40(a)(ii) of the Income Tax Act.

How does partial month rounding work for TDS interest?

Under Income Tax Rule 119A, any part or fraction of a calendar month is treated as a full month. For example, if tax is deducted on April 30th and deposited on May 2nd (2 days gap across two calendar months), interest is charged for 2 full months (April and May).

What is the penalty fee under Section 234E for late TDS return filing?

In addition to Section 201(1A) interest, delaying quarterly TDS return filing incurs a mandatory late fee under Section 234E of ₹200 per day for every day the delay continues, capped at the total TDS amount of the return.