TDS Interest Calculator: 1% vs 1.5% Under Section 201(1A)
TDS defaults have two different interest legs. The rate depends on whether the problem was late deduction or late payment after deduction.
1%: failure to deduct
Interest is 1% for every month or part of a month from the date tax was deductible to the date it was actually deducted.
1.5%: failure to pay after deduction
Interest is 1.5% for every month or part of a month from the date of deduction to the date of actual payment.
Why the distinction matters
Calculate the two periods separately. A single “days late” calculation can be misleading because the statutory rates differ and the measure is month-or-part-of-a-month.
2026 transition
The Income Tax Department says obligations arising for periods before 1 April 2026 remain governed by the Income-tax Act, 1961. Its TDS guidance gives a March 2026 example where TDS deducted in March but paid in May attracts 1.5% interest from deduction to actual payment.
FAQ
Is 1% a daily rate?
No. It is per month or part of a month.
When does 1.5% apply?
For failure to pay TDS after deduction.