TDS Interest, Late Fee and Penalty Under Section 51

TDS Interest explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.

A deductor that gets TDS wrong faces three separate liabilities, not one. They accrue independently, they are computed differently, and two of them attach even where the tax is eventually paid in full.

Section 51(6) — failure to pay the deducted amount attracts interest under section 50(1), at 18%, "in addition to the amount of tax deducted". Section 47 — a late GSTR-7 attracts ₹100 a day up to ₹5,000, reduced by Notification No. 23/2024-Central Tax dated 08.10.2024 (w.e.f. 01.11.2024) to ₹25 a day under each Act, capped at ₹1,000 under each — with no late fee at all where the TDS for the month is nil. Section 122(1)(v) — a penalty of ₹10,000 or the tax not deducted, short deducted, or deducted but not paid, whichever is higher. Section 51(7) — the default is determined under section 73, 74 or 74A.

Interest

Section 51(6): "If any deductor fails to pay to the Government the amount deducted as tax under sub-section (1), he shall pay interest in accordance with the provisions of sub-section (1) of section 50, in addition to the amount of tax deducted."

The Handbook states the rate and trigger: "Where deductor fails to deposit TDS in time, he shall be liable to pay interest @ 18% for the delay period."

The deposit deadline is ten days after the end of the month in which the deduction was made — section 51(2).

And interest is not an alternative to paying the tax. The words "in addition to the amount of tax deducted" make that explicit: the deductor pays what it withheld, plus interest for the period it held it.

Late fee, and the November 2024 relief

Section 47(1) imposes ₹100 for every day during which the failure to furnish a return continues, subject to a maximum of ₹5,000.

The first relief. Notification No. 22/2021-Central Tax dated 01.06.2021 waived the late fee in excess of ₹25 per day with effect from July 2021, and the total in excess of ₹1,000, for late filing of GSTR-7.

The current relief. Notification No. 23/2024-Central Tax dated 08.10.2024, with effect from 01.11.2024, superseding the 2021 notification, waives the late fee payable by a section 51 deductor for failure to furnish GSTR-7 for the month of June 2021 onwards which is in excess of ₹25 for every day during which the failure continues; waives the total in excess of ₹1,000; and adds:

"Provided further that the total amount of late fee payable, where the total amount of central tax deducted at source in the said month is nil, shall stand waived."

The Handbook's arithmetic: from June 2021 onwards the late fee for GSTR-7 is ₹50 a day (₹25 CGST + ₹25 SGST), subject to a maximum of ₹2,000 (₹1,000 + ₹1,000) — "and from 01-11-2024 onwards, no late fees in case the TDS in that month is nil."

The nil-return waiver matters more than its size suggests. Section 39(3), as substituted with effect from 01.11.2024, requires a return whether or not any deduction has been made, and sequential filing has applied since October 2024. A deductor with no deductions in a month must still file — and now does so without a late fee even if it files late. GSTR-7 and sequential filing →

Penalty

Section 122(1)(v) applies where a taxable person "fails to deduct the tax in accordance with the provisions of sub-section (1) of section 51, or deducts an amount which is less than the amount required to be deducted… or where he fails to pay to the Government the amount deducted as tax."

The quantum, as the Handbook states it: "He shall be liable to pay a penalty of ten thousand rupees or an amount equivalent to the tax evaded or the tax not deducted under section 51 or short deducted or deducted but not paid to the Government, whichever is higher."

Three defaults, one penalty. Non-deduction, short deduction and non-payment each attract it, and the ₹10,000 is a floor, not a cap — for a large contract the penalty equals the tax involved.

Determination

Section 51(7): "The determination of the amount in default under this section shall be made in the manner specified in section 73 or section 74 or section 74A."

The reference to section 74A was inserted by section 127 of the Finance (No. 2) Act, 2024, notified through Notification No. 17/2024-Central Tax dated 27.09.2024, w.e.f. 01.11.2024.

So the limitation regime follows the ordinary demand provisions — sections 73 and 74 for periods up to FY 2023-24, and the unified section 74A for FY 2024-25 onwards.

The three exposures compared

Note that they overlap only partly. A deductor that deducted correctly, paid on time, but filed late owes only the late fee. One that deducted and filed but paid late owes interest and possibly the penalty. One that never deducted at all owes the penalty, and — since nothing was withheld — no interest on a deducted amount, though the demand under section 73/74/74A will carry its own interest.

What the supplier is not exposed to

Worth stating, because it is the deductor's own risk and cannot be passed on. The Handbook's parallel point in the TCS context applies equally here: the charging section is independent of the deduction provisions. A supplier's output tax liability on a supply is unaffected by whether the recipient deducted TDS correctly; the consequences of a failure fall on the deductor.

Which is why a deductor cannot argue no revenue was lost. The supplier will have paid its own tax in the ordinary course; the deductor's default is a default in its own obligation.

Key takeaways

• Interest at 18% under section 51(6) with section 50(1), in addition to the tax deducted, where the deposit is late — the deadline being 10 days after the month end.
• Late fee under section 47: statutorily ₹100 a day up to ₹5,000; reduced to ₹25 a day under each Act, capped at ₹1,000 each — so ₹50 a day, max ₹2,000 — from June 2021.
• Notification No. 23/2024-CT (w.e.f. 01.11.2024) supersedes the 2021 notification and adds a full waiver where the month's TDS is nil.
• Penalty under section 122(1)(v): ₹10,000 or the tax not deducted, short deducted or not paid, whichever is higher — the ₹10,000 being a floor.
• Section 51(7) determines the default under section 73, 74 or 74A — the 74A reference added w.e.f. 01.11.2024.
• The three exposures are independent, and a deductor can incur one, two or all three.
• The supplier's own liability is unaffected — the default is entirely the deductor's.

Read next

• GSTR-7: Tables 3 and 4, and the 2025 Changes
• GSTR-7A and How the Deductee Claims the TDS
• Section 51: Who Must Deduct TDS, and the ₹2.5 Lakh Threshold

Disclaimer: Positions stated as on 5 September 2026, based on sections 47, 50(1), 51, 73, 74, 74A and 122(1)(v) of the CGST Act, 2017 and Notification Nos. 22/2021, 17/2024 and 23/2024-Central Tax, as reproduced in the ICAI Handbook on Government Supplies under GST (Including TDS Provisions), updated to 15 April 2026.