What happens if I don't deposit TDS deducted from payments on time?
Quick answer
Like GST, TDS you deduct isn't your money — you deducted it on the government's behalf. Depositing it late brings interest of 1.5% per month, a 30% disallowance of the related expense, a daily late fee on returns, and — for serious or wilful defaults — even prosecution.
Why it's serious
When you deduct TDS from a vendor or employee payment, you're holding the government's tax. Not depositing it is treated as misappropriating government money.
The consequences
- Interest: 1.5% per month (any part of a month counts as a full month) from the date you deducted it to the date you deposit it.
- Expense disallowed: 30% of the expense on which you failed to deduct or deposit TDS is disallowed — meaning your taxable profit (and tax) goes up. (It's added back and only allowed later, once you deposit.) For payments to non-residents, the full expense can be disallowed.
- Late-return fee: ₹200 per day until you file the TDS return, capped at the TDS amount, plus possible penalties for non-filing.
- Prosecution: in wilful or repeated cases, imprisonment from 3 months to 7 years, plus a fine.
Remember the timing: TDS deducted in a month is generally due by the 7th of the next month (March by 30th April).
Our honest take
TDS is the other “money that isn't yours.” Deposit it on time, every time. The interest, the disallowance and the compliance mess from delaying it cost far more than the short-term cash relief is ever worth.
General information only — tax rules, rates and dates change. Confirm the current position with a qualified CA before acting.