Is the interest paid on late TDS deposit allowed as a business expense?

Question

tdsguru.in (CA firm) · Accepted Answer

No — interest under Section 201(1A) on delayed TDS is not deductible as a business expense. Interest paid under Section 201(1A) for late deduction or late deposit of TDS is not allowable as a deduction in computing business income — it is regarded as being in the nature of a tax, not a business expense. The same applies to the 234E late-filing fee and any 271C/271H penalty. So these costs hit you twice: as cash outflow and as a non-deductible item — another reason to deposit and file on time.