What is Income Tax Deducted at Source (TDS)?
Tax Deducted at Source (TDS) is a process of deducting tax in advance, from the bill of salary, commission, professional fee, interest, rent etc.
The person responsible for making such payments, deduct a certain percentage of tax before making the payment in full to the receiver of the payment.
When to deduct TDS?
TDS is to be deducted when payment is getting due or the actual payment is done, whichever is earlier. To know the rates at which tax is deducted read my article Know about the tax you pay (TDS Rates)
When and how to deposit TDS?
The person responsible for deducting TDS, is liable to deposit the deducted tax to the credit of the Income Tax Department on or before the 7th day of next month. Income Tax Department accepts these payments through Challan 281 or online.
Dues dates of payment of TDS are as below, failing which the deductor is liable to pay interest on late payment.
Tax Deduction Months |
Payment Due Dates |
April |
7th of May |
May |
7th of June |
June |
7th of July |
July |
7th of August |
August |
7th of September |
September |
7th of October |
October |
7th of November |
November |
7th of December |
December |
7th of January |
January |
7th of February |
February |
7th of March |
March |
30th of April |
Interest on late deposit of TDS?
Under Section 201(1A), Income Tax Act, if the deductor fails to deposit the deducted tax before due dates as above, he has to pay interest for late payment, at the rate of 1.5% per month from the date at which TDS was deducted to the actual date of deposit.
For example:
If TDS is deducted on 17th April, then due date will be 7th
May. But failing to deposit the TDS on or before 7th May, the
deductor will have to pay interest starting from 17th April; not from 7th
May.
Calculation of Interest Payable:
If TDS deducted on 17th April is Rs.10,000; and the
deductor failed to deposit the tax on the due date i.e. 7th May.
If he pays the tax on 15th
June, then interest will be Rs.10,000 x 1.5% p.m. x 3 months = Rs.450.
Note, that this is to be calculated on a monthly basis and not based on the number of days i.e. part of a month is considered as a full month.
Also, the interest is to be paid is calculated from the date of deduction; not from the due date.
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