How is late TDS deposit interest calculated?
How section 201(1A) interest on a late TDS deposit is computed at 1.5% per month or part of a month, why 1% applies to late deduction instead, a worked example where a two-day delay costs 3%, which challan matches which deduction, and the deposit dates behind the calculation.
In this guide
Section 201(1A) charges 1.5% per month or part of a month on a late TDS deposit, running from the date of deduction to the date of actual deposit. Late deduction is a separate 1% per month, from the date tax was deductible to the date deducted. Because a part-month counts as a whole month, a deposit two days past the 7th can cost 3%.
Which deposit date does interest run from?
Section 201(1A) interest runs from the date of deduction, not from the due date, so the due date only decides whether interest starts at all. Rule 30 of the Income-tax Rules sets those dates, and they depend on who deducted the tax and, for a few payments, on the section. Fix your row below before computing anything. The TDS payment due date guide works through the calendar itself; this page is about what a missed date costs.
| Deductor or payment type | When tax is deposited |
|---|---|
| Non-government deductor (general case) | 7th of the month after the month of deduction |
| Non-government deductor, tax deducted in March | 30 April |
| Government deductor paying without a challan (book entry) | Same day the tax is deducted |
| Government deductor paying with a challan | 7th of the month after the month of deduction |
| Property purchase (194-IA), rent by certain individuals or HUF (194-IB), and certain payments by individuals or HUF (194M) | Within 30 days from the end of the month of deduction |
Does interest start on the 8th or on the deduction day?
On the deduction day. Once the Rule 30 date is missed, section 201(1A) counts from the date tax was deducted to the date it is actually paid, not from the 7th. A 20 June deduction paid on 9 July therefore spans June and July, not only the two days after 7 July.
Which challan matches which TDS deduction?
The deposit instrument follows the type of deduction. Using the wrong one is a common filing error, so settle it before you pay.
- Regular TDS and TCS: use challan ITNS-281. This covers salary, contractor, professional, rent under 194-I, and most other deductions, where you deposit across deductees for a period and file a quarterly statement separately.
- Property, rent, and 194M cases: use a challan-cum-statement, which combines the payment and the reporting. Form 26QB for property under 194-IA, Form 26QC for rent under 194-IB, and Form 26QD for the 194M payments.
The 30-day window in the table applies to the challan-cum-statement cases. For ITNS-281 deposits, the 7th of the next month rule with the March exception applies.
Where does section 201(1A) interest go on ITNS-281?
In the interest column, under the same section code and assessment year as the original TDS. Paying that interest into the tax column leaves the TRACES default open, which is how a second intimation is born.
How is section 201(1A) interest computed?
Section 201(1A) charges two different rates for two different failures. Reading them as one rate is the error that produces the wrong number.
| What went wrong | Rate and period |
|---|---|
| Late deduction (tax deducted after it was deductible) | 1% per month or part of a month, from the date the tax was deductible to the date it was actually deducted |
| Late deposit (tax deducted on time but paid late) | 1.5% per month or part of a month, from the date of deduction to the date of actual deposit |
Both rates run per month or part of a month, so any part of a calendar month counts as a whole month. The two rates above are the standard rates under section 201(1A); treat them as the general rule and confirm the current figure on an official source, since rates in the Act can be revised.
How much does a two-day delay cost?
Suppose you deduct 50,000 rupees of TDS on a contractor payment on 20 June. The deposit due date is 7 July. If you deposit on 9 July, the tax was deducted on time but deposited late, so the 1.5% late deposit rate applies.
- The period runs from the date of deduction (June) to the date of deposit (July). That touches two calendar months.
- Two months at 1.5% is 3% of 50,000, which is 1,500 rupees of interest, even though the payment was only two days late.
The lesson is the calendar boundary, not the number of days. A deposit that slips from the 7th to the 8th crosses into another part-month and can add a full 1.5%. This is why the deposit date is worth hitting exactly rather than treating it as approximate.
What triggers a TRACES default notice?
Interest and notices usually follow a small set of recurring mistakes.
- Applying the 7th of the next month rule to a March deduction instead of the 30 April date.
- Depositing property TDS on the 7th instead of within 30 days, or the reverse, missing the 30-day window entirely.
- Using ITNS-281 for a property purchase instead of Form 26QB, which leaves the deposit unmatched.
- Confusing the section 234E statement late fee, tied to the TDS return, with the section 201(1A) deposit interest.
- Ignoring a TRACES default intimation, which usually names the exact period and amount so you can correct it.
How do I confirm a TDS interest figure?
- Open the tax calendar for the month your deposit fell due, then count from the deduction date, not from that due date.
- Read the TDS Compliance FAQ if the line straddles the 1961-to-2025 cutover, because the earlier of credit or payment still decides the section code on the challan.
- Scan latest news for any CBDT circular that changes how 201(1A) is computed, not only the deposit calendar.
Settle your deductor type and the section first, since that decides which row of the deposit table applies. Then apply 1% or 1.5% to each calendar month the period touches.
Where are TDS interest rules amended?
Section 201(1A) rates themselves rarely move, but a TRACES default computation, a challan-column mapping, or a cutover note on which section code to quote does. Complied AI keeps CBDT / Income Tax updates in one feed so you can open the circular behind a demanded figure instead of paying an unmatched challan. When the question is the calendar rather than the interest, use the TDS payment due date guide.
Practical checks
Common questions
I deducted Rs 50,000 on 20 June and paid on 9 July. What interest do I owe?
Rs 1,500 of section 201(1A) interest. The tax was deducted on time, so the 1.5% late-deposit rate applies, and the period from the June deduction to the July deposit touches two calendar months. Two part-months at 1.5% is 3% of Rs 50,000, even though the payment was only two days past the 7 July due date.
Does a one-day delay really cost a full month of TDS interest?
Yes. Section 201(1A) interest is charged per month or part of a month, so any part of a month counts as a full month. Depositing one day past the due date can cost a full month of interest, not a single day, and a delay that crosses a calendar boundary counts twice.
What is the difference between 1% and 1.5% TDS interest?
The 1% rate under section 201(1A) is for late deduction, running from the date tax was deductible to the date you actually deducted it. The 1.5% rate is for late deposit, running from the date of deduction to the date of payment. A deductor who deducted late and paid late pays both, on their respective periods.
Is section 201(1A) interest the same as the Rs 200 a day late fee?
No. Section 201(1A) interest attaches to the deposit of tax at 1% or 1.5% per month. The Rs 200 per day fee under section 234E attaches to a late quarterly TDS statement, capped at the tax deducted. A deductor who paid on time but filed Form 26Q late owes the 234E fee and no 201(1A) interest.
Can section 201(1A) interest be waived?
Section 201(1A) interest is mandatory and there is no discretion in the section to waive it once the deposit is late. What you can do is correct a wrong computation. A TRACES default intimation names the period and amount, so check whether the deduction date on the statement matches your books before paying the demanded figure.
Where do I pay the section 201(1A) interest?
On challan ITNS-281, in the interest column, under the same section code and assessment year as the original TDS deposit. Paying the interest into the tax column instead leaves the interest demand open on TRACES and the challan unmatched against the default, which is what produces a second intimation.
How is late interest different from the TDS payment due date itself?
Section 201(1A) interest starts from the deduction date once a Rule 30 due date is missed, so the calendar only decides whether interest starts. The 7th, 30 April, and 30-day rows are mapped in the TDS payment due date guide. This page is the arithmetic after that miss: 1% or 1.5%, part-month counting, and which challan column to use.
I used ITNS-281 for a flat purchase. Does that change the interest?
Yes, because Form 26QB never matched, so TRACES still treats the 194-IA tax as unpaid. Section 201(1A) then runs from the deduction date until a 26QB (or Form 141 Schedule B from April 2026) actually deposits it. Paying the same rupees on the wrong instrument does not stop the interest clock.
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How this guide was prepared
This guide is published by the Complied AI research desk. Its source list and stated position were checked against the official records shown below on 19 July 2026.
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