Interest on Late Payment of TCS

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In case the assessee deposits the TCS (Tax Collection at Source) Payment after the due date of payment of the tax deducted at source, he shall be liable to pay interest @1% for every month or every part of the month during which the amount is not deposited with the government.

Interest @ 1% is liable to be paid from the date on which the TCS amount was collected and not from the date the TCS payment was due.

For example: TCS amount was collected on 25th June and the due date for TCS Payment was 7th July. The assessee fails to deposit the TCS amount by 7th July. In such a case, the Interest would be calculated from 25th June and not from 7th July.

The interest is to be calculated as per illustrations below: 

Example:

Tax Collected on 26th June, TCS amount deposited on 9th July (due date was 7th July)

The period of 26th June to 30th June will be calculated as one month (being part of a month i.e. 30 – 26 = 4 days) & from 1st July to 9th July will also be treated as one month. As such in this case, the interest payable is for two months. Total interest would be 2%. Sounds odd, but it is true –  for a delay of 2 days, one has to pay interest for two months.

Note: In the above example, if tax was collected on 30th June instead of 26th June, the number of days in June is calculated as 30 – 30 = 0 days. As such interest for one month will be applicable i.e. only for July.

Logic behind this calculation is that, if dues are not paid on time, the interest for each month (or part thereof) is to be paid right from the date of collection till date of deposit of the TCS amount. Each month is treated based on the Calendar Month or part thereof, instead of counting the number of days. However, if tax is collected on the last day of the month, that month is not counted for calculation of interest.

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