TDS Challan Payment: Compliance and Penalties

TDS challan payment is an essential process for collecting taxes in India. It holds true for organisations, citizens, and the government to guarantee timely collection of taxes. However,  there are significant consequences for failing to comply with TDS return filing requirements outlined in Section 271H of the Income Tax Act, 1961. This penalty can range from a minimum of Rs 10,000 to a maximum of Rs 1,00,000. However, with the right guidance about penalties, taxpayers can easily get through the process without any consequences. Read this blog post to learn all about it.

Breakdown TDS Non-payment

The penalty amount, when unable to comply with TDS challan payment, is not solely determined by the severity of the offence. Here’s a breakdown of the situations that can trigger this penalty:

● Non-filing: You will be liable for the penalty if you completely neglect to file your TDS return within the stipulated time frame.

● Delayed Filing: Even if you eventually file the TDS return after the due date, you can still be penalised.

● Wrong Filing: Submitting inaccurate or incorrect information in your TDS return can also lead to a penalty. This emphasises the importance of maintaining accurate records and double-checking your return before submission.

It’s helpful to understand that these penalties are meant to deter non-compliance and ensure the timely filing of TDS returns. You can avoid these hefty penalties and maintain good tax compliance by fulfilling your TDS filing obligations. Remember, timely and accurate filing is about avoiding penalties and fulfilling your responsibility as a taxpayer.

Understanding Interest on Late TDS Payments

Filing your TDS returns on time is essential, but what happens if your payment is delayed? In such cases, the government charges interest on the overdue amount. Here’s how this interest is calculated:

The Formula:

The interest on late TDS payments is calculated using a simple formula:

Interest = TDS amount * Interest rate * Number of months (including part of a month)

Let’s break it down further:

● TDS amount: This refers to the Tax Deducted at the Source that you were supposed to deposit on time.

● Interest rate: The current interest rate for late TDS payments is 1.5% monthly.

● Number of months (including part of a month): Even a partial delay incurs interest. For instance, if the due date falls on the 7th of a month and your deposit is on the 20th, April and May are considered for interest calculation.

Example Calculation:

Let’s say you have a TDS amount of Rs. 50,000 due for deposit on April 7th, 2024, but you deposit it on May 20th, 2024. Here’s how to calculate the interest:

1. Number of Months: April (1 month) + May (considered as a full month due to partial delay) = 2 months

2. Interest: Rs. 50,000 (TDS amount) * 1.5% (interest rate per month) * 2 months = Rs. 1,500

Therefore, in this scenario, you would be liable to pay Rs. 1,500 as interest for the delayed TDS payment.

Interest on Late TDS Payments

There can be some confusion regarding the interest rate applied to late TDS payments. Here’s a clarification:

● Standard Rate: The current standard interest rate for late TDS payments is 1.5% monthly. This applies in most scenarios, including where you deducted TDS from the payee.

● Exceptional Rate: A lower interest rate of 1% per month might be applicable in specific cases. This applies if you fail to deduct TDS from the payee in the first place. However, it’s important to note that this doesn’t absolve you of the responsibility to deduct TDS and deposit it with the government. The 1% rate only applies to the interest calculation on the non-deducted TDS amount.

TDS on Interest Income: Thresholds and Implications

Tax Deducted at Source (TDS) applies to various types of income, including interest earned. The amount you receive might be subject to TDS depending on who pays the interest and the total amount. Here’s a quick explanation:

Banks have a higher threshold for interest payments without TDS than other entities. If a bank pays you interest, TDS is only deducted if the interest amount exceeds Rs. 10,000 in a financial year. For non-bank entities (like companies), the threshold is lower at Rs. 5,000. If the interest amount surpasses the threshold, TDS is deducted from the entire amount, not just the excess.


Remember, timely TDS payments ensure tax compliance and help you avoid additional interest charges. Filing and paying your TDS on time can save you unnecessary trouble and potential financial penalties. Make sure you fufill your responsibilities on time to avoid any potential penalties.

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