Provision of adjustment - tds liability

[Guest]

Dear Sir Suppose we have Tds liability of Rs 100 & Interest thereon is Rs 20 & We have paid Rs 115 for that. Now my question is whether Rs 115 paid will be first adjusted towards Interest of Rs 20 & balance Rs 95 will be adjusted against principal amount or vice versa. Kindly clarify,giving the provision of Tds law. Regards Shatrughan (RLE India Pvt Ltd)

[Surender Gupta]

As per the provisions of Income Tax and TDS, interest is a simple interest. Therefore, you need to adjust the amount of TDS first out of Rs. 115 and interest thereafter with the remaining amount. The balance amount of interest should be deposited as Interest.

AI Summary

TDS payment allocation requires payments be applied first to tax withheld, with interest paid from remaining funds. Payment covering both TDS principal and interest must be applied first to the TDS principal and any remaining amount applied to interest; any unpaid interest after such application must be deposited as interest.