Our company deducted TDS from vendor payments months ago but missed depositing it and left it out of the quarterly TDS returns. What's the exposure, and what's the correct way to fix it?
1 Answers
Fix it as soon as possible. The interest grows every month, and the longer it runs, the worse the other consequences get.
Exposure:
- Interest under Section 201(1A): 1.5% per month, or part of a month, from the date of deduction to the date of deposit. TRACES counts both the first and last month in full, so 15 months means 22.5%.
- Late filing fee or penalty for incorrect or incomplete TDS statements (sections 234E and 271H).
- Prosecution risk for deducting and not depositing (Section 276B) in serious cases. Prompt voluntary payment matters.
- Disallowance of the expense under Section 40(a)(ia) until the TDS is paid.
Fixing it:
- Deposit the TDS plus interest by challan, under the right section and assessment year.
- File a correction statement for each affected quarter in the RPU (validated with the FVU tool): add the new challan, map the deductee rows with the actual deduction dates, and claim the interest paid in the challan details. If you leave interest as zero, TRACES won't use it and will raise a demand for the same amount.
- Check the quarter. Rows filed in the wrong quarter with wrong dates create fresh interest demands.
- Download the justification report after processing and clear any remaining demand.
- Issue Form 16A to the vendors, and tell your auditor before the tax audit report is signed.
