{"id":817,"date":"2026-08-06T14:34:59","date_gmt":"2026-08-06T09:04:59","guid":{"rendered":"https:\/\/www.taxaj.com/learn\/tds-deducted-but-not-deposited\/"},"modified":"2026-08-14T11:10:08","modified_gmt":"2026-08-14T05:40:08","slug":"tds-deducted-but-not-deposited","status":"publish","type":"post","link":"https:\/\/www.taxaj.com/learn\/tds-deducted-but-not-deposited\/","title":{"rendered":"TDS Deducted But Not Deposited \u2014 Consequences & How to Fix"},"content":{"rendered":"

Deducting TDS but not depositing it<\/strong> with the government is a serious default. The deductor faces interest, a disallowance of the related expense, penalties, and even prosecution. This guide explains the consequences and how to fix it.<\/p>\n

The core rule<\/h2>\n

When you deduct TDS, you hold that money in trust for the government and must deposit it by the due date (generally the 7th of the next month; special dates apply for March and for TDS on property). Deducting and not depositing is treated far more seriously than a genuine short-deduction.<\/p>\n

Consequences of not depositing TDS<\/h2>\n
    \n
  • Interest under Section 201(1A):<\/strong> where TDS is deducted but not paid, interest of 1.5% per month<\/strong> (or part of a month) applies from the date of deduction to the date of actual payment. (If TDS was not deducted at all, the rate is 1% per month.)<\/li>\n
  • Disallowance under Section 40(a):<\/strong> the related expenditure can be disallowed<\/strong> while computing business income if TDS is deducted but not deposited by the due date (30% for resident payments; 100% for many non-resident payments), until it is paid.<\/li>\n
  • Deductor treated as “assessee in default”<\/strong> under Section 201, and a penalty under Section 221<\/strong> can be levied.<\/li>\n
  • Prosecution under Section 276B:<\/strong> failure to deposit TDS can attract rigorous imprisonment<\/strong> (three months to seven years) with fine in serious cases.<\/li>\n
  • The deductee\/employee may face difficulty getting TDS credit until it is deposited and reflected in Form 26AS\/AIS.<\/li>\n<\/ul>\n

    How to fix it<\/h2>\n
      \n
    1. Deposit the outstanding TDS immediately with interest under 201(1A)<\/strong>.<\/li>\n
    2. File or revise the relevant TDS return (24Q\/26Q\/27Q)<\/strong> so the credit flows to the deductee’s 26AS.<\/li>\n
    3. Respond to any TRACES default notice and reconcile challans.<\/li>\n<\/ol>\n

      TAXAJ handles TDS compliance<\/a>, corrections and default resolution.<\/p>\n

      Frequently asked questions<\/h2>\n

      What is the interest for TDS deducted but not deposited?<\/h3>\n

      1.5% per month<\/strong> (or part) under Section 201(1A), from the date of deduction to the date of payment.<\/p>\n

      Can the expense be disallowed if TDS isn’t deposited?<\/h3>\n

      Yes \u2014 under Section 40(a)<\/strong>, the related expenditure can be disallowed until the TDS is deposited.<\/p>\n

      Is there prosecution for not depositing TDS?<\/h3>\n

      Yes, Section 276B<\/strong> provides for rigorous imprisonment and fine in serious cases of failure to deposit deducted TDS.<\/p>\n

      \n

      Behind on TDS deposits or got a default notice?<\/strong> TAXAJ helps you deposit, correct returns and close defaults. Fix your TDS with TAXAJ \u2192<\/strong><\/a><\/p>\n

      Related guides:<\/em> TAN & TDS<\/a> \u00b7 24Q filing<\/a> \u00b7 Tax notice help<\/a><\/p>\n