TDS – Point of Deduction, Interest, Penalties and Late filling fee.

TDS has been a confusion from time to time in our head, addition to this Interest, Penalty and late Fee charges on TDS have been a major confusion. To have a better understanding on this subject i shall give a small explanation through this article.

As a part of my work many of the clients i have handled have faced  issues related to TDS under section 194J i.e. TDS on Professional Fee.

Example of a situation –

A  Company had made an advance of Rs. 180,000/- to a vendor for providing professional services for developing an App for his company. The Advance was made during the month of October 2016 and was informed to Auditor in the month of March 2017 during the finalization of accounts, so there was a delay in paying TDS as the company was not aware of TDS on advances had to be made, the Company was worried when TDS payable amount was informed to them along with interest and penalty.

Lets see what happened to the calculation of TDS payable.

At the end the company had to face a loss of Rs. 13,420/-

To avoid these mistake i thought i should share few tips on better understanding about point of deduction of TDS.


What is the point of deduction of TDS u/s 194J?

Tax is to be deducted either at the time of actual payment of such fees(Final payment or Advance) or when invoice credits the account of the payee whichever is earlier.

In case you have not deposited TDS or filled TDS by the correct date, the following penalties are applicable:

  1.  Late filing fee (if you do not file by the deadline)
  2.  Interest (if you do not deposit the TDS amount in time)
  3.  Penalty (if TDS is not filed within one year of the due date)

1) Late Filing Fee Under Section 234E, you will have to pay a fine of Rs 200 per day (two hundred) until your return is filed. You have to pay this for every day of delay until the late filling fee amount is equal to the amount you are supposed to pay as TDS.

For example, say that your payable TDS amount is Rs 5000 on 13th May and you pay it on 17th November (i.e. 189 days, counting 17th November). Then the calculation comes out to Rs 200 x 189 days = Rs 37800, but since this is greater than Rs 5000, you will have to pay only Rs 5000 as the late filing fee.

2) Interest :

3) Penalty for late filing of TDS return:

  • Penalty (Sec 271H): Assessing officer may direct a person who fails to file the statement of TDS within due date to pay penalty minimum of Rs.10,000 which may extend to Rs.1,00,000.
  • Penalty under this section is in addition to the penalty u/s 234E.
  • This section will also cover the cases of incorrect filing of TDS return.

Moral of the story – To avoid all this interest and penalties pay your TDS liabilities on time.

Hope this article was helpful.

Click Here for TDS rates as per Income Tax.

Click Here to Download in PDF.


Author: Dhiraj Jain

Dhiraj Jain is a graduate from Jain University, currently pursuing MBA in Finance and Chartered Accountant Article. Apart from education he is a Graphic Designer out of passion.

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