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

Payment Adjustment: Principal TDS of Rs 100 to be settled before Rs 20 interest per Income Tax rules. A query was raised regarding the adjustment of a payment of Rs 115 towards a TDS liability of Rs 100 and interest of Rs 20. The question was whether the payment should first cover the interest or the principal amount. The response clarified that according to Income Tax and TDS provisions, the principal TDS amount should be adjusted first from the payment, and any remaining amount should then be applied to the interest. Any outstanding interest should be paid separately.