Home » eTDS Default Notices » TDS Default Notices : How to avoid Interest Defaults

TDS Default Notices : How to avoid Interest Defaults

Each e-TDS statement is processed by TIN and defaults are put on web site for deductors to rectify.

In this article, we will examine what is default on account of interest and how it can be avoided

When is interest payable ?

As per income-tax , interest is payable under the following two circumstances

  1. Tax is not deducted , when it was deductible
  2. Tax once deducted, is not paid on or before  due date

When tax is to be deducted

At the time of credit or payment, whichever is earlier
193- Interest on securities
194A- Interest Other than “Interest on securities”
194C- Payment to contractors / sub contractors
194D – Insurance commission
194H – Commission or Brokerage
194G- Commission on sale of lottery tickets
194I- Rent
194J- Professional or technical fees
Before making payment or distribution
194- Dividend
At the time of payment
192- Salaries
194B- Winning from lotteries / crossword puzzles
194BB Winnings from horse races
194EE – Payment from National Saving Scheme
194F Payment for repurchase of units by UTI / mutual funds
194LA: Payment of compensation on acquisition of certain immovable property

What is the Due date of deposit of TDS ?

  • All the TDS deductions made during a month are to be paid on or before7th of the next month. Example : All deductions made during April ,must be paid on or before May 7th, 2010.In case 7th of the month happens to be a Sunday or a bank holiday, then the payment can be made on the next business day.
  • Beginning FY 2010-11 ,for deductions made during the month of March, payment must be made on or before 30th April.

What is the rate of interest ?

W.e.f 01-07-2010

  • From the date when TDS was deductible till date of actual deduction,rate of interest is 1% p.m.
  • For delayed deposit, from date of deduction till actual date of payment, rate of interest is 1.5% p.m

Prior to 01-07-2010

  • From FY 2006-07 onwards for delayed deposit, from date of deduction till actual date of payment, rate of interest is 1.0% p.m

What is the due date of payment  of interest ?

Interest must be calculated and paid before filing of eTDS statement of the quarter.

Quarter 1 Jul-15
Quarter 2 Oct-15
Quarter 3 Jan-15
Quarter 4 May-15

How is interest to be calculated ?

  • Interest is to be calculated for every month or part of a month comprised
    in a period, any fraction of a month shall be deemed to be a full month
  • The amount of tax, penalty or other sum in respect of which such interest
    is to be calculated shall be rounded off to the nearest multiple of one
    hundred rupees and for this purpose any fraction of one hundred rupees
    shall be ignored and the amount so rounded off shall be deemed to be the
    amount in respect of which the interest is to be calculated.

Of course, those using TdsPac software from Fast Facts need not worry. Automatic and accurate calculation of interest is available in single click.

Example of Interest Calculation

Date Of Payment Date of Deduction Due Date Date of Deposit Delayed Deposit Delayed Deduction
Months Rate Months Rate
05/04/2010 05/04/2010 07/05/2010 09/05/2010 2 1% - -
10/04/2010 10/04/2010 07/05/2010 09/05/2010 1 1% - -
02/07/2010 04/08/2010 07/09/2010 07/09/2010 - - 2 1%
02/07/2010 04/08/2010 07/09/2010 15/09/2010 2 1.50% 2 1%

Avoiding Interest Default

To avoid interest default

  • Deduct tax at source in time
  • Deposit TDS by due date
  • In case of delayed deduction / deposit ,calculate interest and deposit the same
  • Show such interest properly in eTDS statement

Rectifying Interest Default

  • You may download default notices after logging into your TAN account.
  • Default Notice is a plain excel sheet without any password protection
  • If there is any default on account of non-payment or short  payment of interest, you need to pay up the same
  • After paying , you have to  file correction statement by including the interest payment challan.

56 Comments

  1. PM says:

    Defaults had been identified in the Regular statement filed by us for Q2 of FY 2012-13 for Form 26Q. Short amount is deducted and filed by us to the IT department.Now, default is generated shows reason as “Short deduction”.Kindly give us an early solution to rectify the problem.

  2. Sandhya says:

    While calculating TDS amount for commission agent, Rs.50 has been calculated less but it is shown as already dedcuted in e-tds return.How can it be rectified???/

    • N. Gopala says:

      Sandhyaji,
      If the challan amount is less by Rs. 50/- than required, you will have to deposit Rs. 50/- with interest by Challan. Then make Correction Statement after importing the Conso file. You will have to adjust the amount paid to match with the TDS deposited under the earlier Challan and the additional Challan.

  3. Gaurav Lohia says:

    SIR i have a doubt what if i accrue expense in april-12 and book the expense in march-12. in this case when will i be liable to remit tds to IT. (u/s 194i)

  4. saikrishna says:

    How to generate a default statement for pertaining to some quarter in NSDL website

  5. [...] TDS Default Notices : How to avoid Interest Defaults 47 comments August 2011 [...]

  6. Subham says:

    My query is, We have corrected our TDS return by paying amount due to invalid pan.
    we have added a new challan and adjust further 10% amount due to invalid pan. but the same default is generate again with double no. of deductees.

    what to do..???
    Kindly guide me..

  7. Abhignya Shah says:

    We had paid tds payment of Sep-2012 in 8th October,2012 as there is Sunday on 7th Oct, 2012 . So we can liable to pay interest or it is proper method to pay tax on next day as there is Sunday on 7th of the next month.

  8. mitul says:

    sir, my TDS challan no show default but TDS challan is upload plz give me solution then default challan to correct challan. plz

  9. Sumit says:

    sir,
    i have a doubt regarding allowbility of expenses against which tds collected before filling of return but deposited after the filling date. For example :- If Mr. Ram made TDS while paying rent, towards using of machine, to the machine owner in Financial Year 2009-10, but not deposited within the due date, ie., within the return filling date, then the expenses become dis allowable in that year. But if Mr. Ram deposited the same TDS amount in the subsequent year, can he avail the exepnses, for which TDS deposited, as allowable expenses in that year in which he deposited the TDS amount.

  10. Anuj K says:

    Wat was the due date for Quarter4 TDS fro financial year 2009-2010..??

  11. srinivasa rao c says:

    If the TDS payment is after 12 months. is there is any compound fee is applicable

  12. Pradeep Tawade says:

    dear Sir,
    we have a default for Q1 Q2 Q3 & Q4 2009-2010 2011-12. as some cases PAN no. is no valid, We have revised TDS return filed the fvu file at TIN center. but in our TAN account still the default is there. Is there any duration for them to remove the default? or any other things need to be done??
    We will be happy if you would give a good suggestion

    Thanking You

    Regards
    Unicon Fibro Chemicals Pvt Ltd
    Mumbai

    • K Somasekhar says:

      after successful e-filing of correction statement, the copies of default ststus statements, copies of provisional receipt /token no. of original and revised returns, copies of short deducted and interest payments challans if any along with reply to the Default notice should be sent to IT dept. from whoom the default notice is received. Generally after 2 working days after the e-filing we are able to take the From 16A for the invalid PAN Nos. and short deducted PAN Nos.

      K Somasekhar,Management Trainee,
      Bharat Dynamics limited

      For any corrections please feedback me at e-mail. somasekhar.cwa@gmail.com

      • N. Gopala says:

        Mr. Somasekharji,
        I beleive that sending the documents to IT Department is not required after filing the Correction Staement. For the first Correction Staement of our Company, I had approached the IT Officer with the documents but he was not willing to receive the documents since the Default Statement was received from NSDL. He said that we may submit the documents to them if we receive a Notice from the IT Department.As you have stated, we can download Form 16A, within 2-3 days of filing the Correction Statement. But, IT Dept. takes quite some time to update the Default Statement after filing the Correction Statement. I have observed that in some cases although the interest on delayed payment and delayed deductions are updated, the interest on interest is not updated. I had asked an Income Tax Officer at Charni Road, Mumbai about this, but he said that we have to approach NSDL regarding this. It is very difficult to connect to NSDL helpline No. My email was not replied by them. I hope the interest on interest will be updatede in due course.

      • yogesh bhide says:

        Mr. N.Gopala,

        With ref to your below mail I have approched to NSDL for the same query there reply is as follows,

        If you have filed any correction statement which is accepted by TIN & the Defaults details are not updated yet, you are requested to contact the TDS Assessing Officer.

        My correction return is accepted but default notice is not clearted from web last 6 months.

  13. ARUN KUMAR M says:

    my net annual salary income is Rs.2,04,586/-, My tax is Rs.2,533/-. My employer not deducted TDS. How much i want to pay interest and income tax. please guide me.

    • N. Gopala says:

      Since tax payable is less than Rs. 5,000/-, I beleive, you may pay the tax before 31/07/2012 (before filing IT returns) without any interest.

  14. omprakash sharma says:

    What i do in the case of default interest paid,

    • N. Gopala says:

      After paying the default interest you have to file a Correction Statement for the corresponding Quarter.

  15. Nantha says:

    I have received the default mail and i login to NSDL website it was asked three deductee’s PAN and TDS amount but i deduct the TDS for only one person then how to get the default file and consolidated e-TDS file. Pls clarify

  16. S. Bhuvaneswari says:

    SIR,

    I HV RECD. DEFAULT FOR LESSER PAYMENT OF INTEREST IN 4TH QUARTER OF AY 2011-12 AND IN 1ST & 2ND QUARTER OF AY 2012-13. ie I HV PAID INTEREST FOR DELAYED PAYMENT WITH WRONG CALCULATION IN THE MONTH. NOW HOW I SHOULD COMMUNICATE THIS TO I.T.DEPT. OR CORRECTION RETURN SHOULD BE FILED FOR THIS INTEREST PAYMENT ALSO.

    • N. Gopala says:

      After depositing the due amount as per default statement, Correction Statement has to be filed. It takes some time for the IT Department to take the Correction Statement into their records.

      • subramanyem says:

        how to file correction return if only interest amount paid through challan

      • N. Gopala says:

        Dear Subramanyemji,

        You have to download the Consolidated file from TRACES (earlier it was from NSDL) site and do the correction by adding the challan under which you have paid the interest. If the interest is due to delay in payment of TDS, you do not have to do any correction in the deductee sheet. if the interest arises out of short deduction, you have to do correction in deductee sheet also. After validating through software, you can submit the fvu file at NSDL facilitation center.

  17. Sanchita says:

    Similar query raised by Panda regarding section code, after TDS deducted interest paid through challan from TDS amount of Interest payable due to late depost of tax deducted. Please prescribe the section code under which the payment to be deposited in bank.
    e.g.
    TDS amount of Interest payable due to late depost of tax deducted Rs.100
    Less :deducted interest paid through challan Rs. 70
    ————
    Rs.30

    in this case, for Rs.30/- which section code will come?

    • N. Gopala says:

      The Section code would be the same section under which the less deduction has occured. The default staement gives the deducteewise break up of interest due and also the section code. The interest has to be deposited under the code in which the Rs. 30/- has been deducted less.

  18. Bharathi Nursing Home says:

    dear Sir,
    we have a default for Q3, 2011-12 generated on 24.01.2012. we paid the interest mentioned in the default on 14.02.2012 and filed the fvu file with correction on the same day.
    but in our TAN account still the default is there. Is there any duration for them to remove the default? or any other things need to be done??
    We will be happy if you would give a good suggestion
    Thanking You

    Regards
    Bharathi Nursing Home
    Bangalore

  19. Mangat says:

    sir

    I have deposited a challan of Rs. 10000/- but wrongly it shown in TDS return as two seperate challan with same particulars i.e. BSR code, Challan serial no. & date. Now we are received mismatched notice from the department. In NSDL site Quarterly statement status also shown its ‘failed to match’. Now I how to file correction statement.

  20. N. Gopala says:

    The PAN of proprietory firm and that of the Proprietor is same and if the PAN of the Proprietor is quoted in the TDS returns, there is no case for deducting 20%. However, if the payment is made in the name of the proprietory firm and not to the proprietor by name, I believe, the rate of deduction for individual payee may not be applicable. e.g.: under Section 194C, the rate applivable for contractor or sub-contractor would be 1% for individual but 2% for the proprietory firm.
    The interest will be calculated from the date of deduction upto date of deposit if the deducted amount is not deposited within the due date and further interest on the interest due will be payable upto date of processing if there is default in payment of interest.

    N. Gopala

  21. Mittal says:

    If TDS of proprietory firm is deducted at 1% and in TDS return also name of proprietory firm is written instead of Individual name.TDS defaults are showing TDS should be deducted at higher rate ie 20%. What is the procedure to rectify the same?.
    The department have charged Interest “from date of deposit till date of processing”. However according to the rules the deposit date is to be taken for the date of the credit to the Government. Now whether the date of deposit or the date of processing to be considered?

    • rajesh says:

      i have same case…..can we remove flag H …..and how….if you find solouation please forward me on

  22. Monali Nikam says:

    I have download Default file for 4th Quater 2009-10 from nsdl site, in that i found interest is calculated on tds amount deposited in bank on 21.05.2010, which is deducted on 31.03.2010. As per rules tds deducted on 31.03.2010 is to be paid on or before 31.05.2010. what should I do?

    • fastfactsindia says:

      Please verify if this transaction is marked as credited entry.

      • rahul Mohile says:

        Simmilar to query raised by Monali Nikam, In our case entry is marked as credit entry denoted as “C” in column “Book Cash flag*” in default file. Still we have been charged interest for delay in depositing TDS. What is the procedure for further…

    • jalpeshjmr says:

      Monali ji, In such case revise your TDS return in following manner:
      1. take consolidated file of relevant quarter from NSDL
      2. import the same in RPU 2.8 presently recognized NSDL software
      3. do not correct anything in challan details tab
      4. corrcet the entry in default i.e. made on 31/03/2010
      5. In the very last column of this annexure ‘whether TDS is paide by book entry’ ? make it ‘Yes’ and rectify the same return your problem will be solved after revised filing of TDS return

    • jalpeshjm says:

      Revise your return
      In consolidated file, go to 31.03.2010 entry and in the very last column of the annexure tab of deductee detail ‘tds is deposited by book entry?’ give ans as ‘Yes’ and revise the same return, default will get solved for sure

  23. AMEET KUMAR says:

    Sir

    What is the procudure of forgatten USER ID & PASSWORD,

    i registred tan by nsdl february 2011 but not received any mail throuw user id & password , i contact with nsdl but not ans properly reply nsdl ( just time updation in tan registration detail in site) so i request to nsdl kindly sent the letter formet but till date not recieved any formet

    • N. Gopala says:

      I believe you can re-register for TAN Account

    • PRAVEEN KUMAR JAIN (MBA) says:

      NSDL SENDED YOU MAIL. PLEASE CHECK ON YOUR MAIL IN TO SPAM BOX.

      • N. Gopala says:

        I believe that you can now re-registert your TAN No. at NSDL website and note down the TAN Registration No.and pass word. The password is required to be changed periodically.

    • jalpeshjm says:

      there is nothing big in it u can make as many as user of TAN with different names and same data will be replicated, so in my opinion re make the account and proceed further Ameetji

  24. Rohini H, Naik says:

    Sir,

    I want to know if my Bill amount is 100000 and Bill date is 1/9/2011. I have deducted tds @ 10 % on Prof. Fees on 1/9/2011 and paid to income tax on 3/9/2011. I have paid payment to the party on 30/9/2011. It will come under defaulter please let me know.
    Best Regards,
    Rohini.

  25. N. Gopala says:

    Sir,

    What is the time limit for payment of interest and also to file correction statements? When is the interest on interest wil be applicable and at what rate? Kindly clarify.

  26. paritosh says:

    how to revise return with default interest paid?

  27. N. Gopala says:

    Sir,

    Under the head ‘What is the rate of interest?” you have said that The rate of interest prior to
    1.7.2010 for delayed deposit is 1.5% p.m. and that the rate of interest is 1% p.m.from F.Y. 2006-07 onwards. What is the rate of interest applicable for delayed deposit for the period 1.4.2007 to 30.6.2010? Kindly clarify.

    In the table under “Example of Interest Caculation” following may please be clarified:

    In the first example, the delay in deposit is from 7.5.2010 t0 9.5.2010 which is less than one month. Why you have shown the delay as 2 months? For the same delay, in the second example you have shown 1 month delay. In the fourth example again you have shown a delay of 2 months whereas the actual dely in deposit is only 8 days.

    Best regards,
    N. Gopala

    • Rate of Interest

      Prior to 01-07-2010 , there was only one rate of interest payable @ 1% p.m. from the date tax was deductible till it was actually deposited

      After 01-07-2010, there are two rates of interest
      1% p.m. from the date it was deductible till it was actually deducted
      1.5% p.m. from the date it was deducted till it was deposited

      Example table clarification

      First row : Delay has to be calculated from date of deduction i.e 05-04-2010 and not from due date which you have mentioned

      Second row : Delay from 10-04-2010 to 09-05-2010 is one month only

      Fourth row: Yes this is very interesting. You may feel that actual delay in deposit is only 8 days , still it entails delay of 2 + 2 months. First delay of 2 months is because it was not deducted on date of payment/credit i.e. 02-07-2010. Hence from 02-07-2010 to 04-08-2010 , delay is 2 months ( part of month rounded off to one)
      Similarly delay in deposit from 04-08-2010 to 15-09-2010 is 2 months.

    • Pranit M. Gawli says:

      Mr. N. gopala,

      There is clear mentioned that the delay in deposit calculated from the date of deduction and not from the date of deposit…so its calculated from the date of deduction i.e. 05.04.2010..
      its calculated like this…(05.04.2010 to 04.05.2010 1 month) and (05.05.2010 to 09.05.2010 1 month) ( Note.part of the month rounded off to 1)
      second n forth eg also related to this explanation…

  28. lnpanda says:

    What is the section code to be applied for deposit of interest due to late deduction or late deposit at the time of Correction, till now there is no section code available in any software. Please prescribe the secction code under which the payment to be deposited in bank.

    • For each section , you have to calculate interest separately and while depositing interest, and make separate e-payment for each section.

    • jalpeshjm says:

      Yes, TDS interest is to be paid by TDS section category but at the time of filling challan no. 281 select ‘raised by IT department in Regular Assessement’ (400)

      • SAJAN KESHRI says:

        BUT UNDER WHICH CODE 94A (SOLUTION GIVEN BY ITO HELP LINE), OR TO THE RELEVANT CODE ( 194J, 194C, ETC.) FOR WHICH DEMAND OF INTEREST IS RAISED BY I. T. DEPTT.

      • N. Gopala says:

        The interest is to be paid under sections 94C, 94J etc under which the interest became due.
        N. Gopal

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