In case the assessee deposits the TDS Payment after the due date of payment of the tax deducted at source, he shall be liable to pay interest @1.5% for every month or every part of the month during which the amount is not deposited with the government.

Interest @ 1.5% is liable to be paid from the date on which the TDS amount was deducted and not from the date the TDS payment was due.

**For example:** TDS was deducted on 25th June and the due date for TDS Payment was 7th July. The assessee fails to deposit the TDS 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: **

**Case 1:**

Tax Deducted on 26^{th} June, TDS deposited on 9^{th} July (due date was 7^{th} July)

The period of 26^{th} June to 30^{th} June will be calculated as one month (being part of a month month i.e. 30 – 26 = 4 days) & from 1^{st} 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 3%. Sounds odd, but it is true – for a delay of 2 days, one has to pay interest for two months.

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

**Case 2:**

Tax Deducted on 20^{th} March, TDS deposited on 5^{th} May (due date was 30^{th} April)

The period of 20^{th} March to 31^{st} March will be calculated as one month, 1^{st} April to 30^{th} April will be another month & from 1^{st} May to 5^{th} May will be treated as another one month. As such in this case, the interest payable is for three months. Total interest would be 4.5%. For a 5 day delay, the interest payable is for 3 months.

**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 deduction till date of deposit of the TDS amount. Each month is treated based on the Calendar Month or part thereof, instead of counting the number of days. However, if tax is deducted on the last day of the month, in that case, that month is not counted for calculation of interest.**

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