How to Avoid TDS Interest & Late Fees (Section 201(1A) & 234E)

2026-06-09 · 6 min read · by a CA firm

TDS penalties are almost always avoidable — they come from missed dates, not from complex law. Here is what they are and how to stop paying them.

Interest under Section 201(1A)

There are two separate charges, and they can both apply to the same amount:

• Late deduction — 1% per month (or part of a month) from the date you should have deducted to the date you actually did.
• Late deposit — 1.5% per month (or part of a month) from the date of deduction to the date of deposit.

Note "or part of a month": even a single day into a new calendar month counts as a whole month, so a deposit slipping past month-end is costly.

Late-filing fee under Section 234E

File the quarterly TDS return late and a fee of ₹200 per day accrues until you file — capped at the total TDS in that return. On top of that, filing more than a year late can attract a separate penalty.

A worked example

You deduct ₹10,000 in April but deposit it on 10 June (due was 7 May). That is late deposit spanning May and June — counted as parts of two months at 1.5% = 3% = ₹300 interest. Small here, large at scale.

The routine that prevents it

1. Record every deduction as it happens in a working file, with the date.
2. At month-end, total deductions section-wise and pay one challan per section by the 7th.
3. Map each deduction to its challan, so nothing is left unpaid.
4. File the return on the quarter-end date — not after.

Bookmark our due-date calendar and use the TDS Wizard to get each deposit date right the first time.

This article is general information for FY 2026-27, not advice for your specific case. Verify against the latest law or talk to a CA.