Interest on delayed Income Tax/TDS/GST/any statutory payment: when allowed as a deduction

Interest is a vital component when it comes to taxes and other statutory payments. When an individual or a business delays the payment of taxes or any other statutory payment, interest is levied on the outstanding amount as a penalty. However, the question that arises is whether the interest paid on delayed taxes or statutory payments can be claimed as a deduction under the Income Tax Act, 1961. In this article, we will discuss the various provisions related to interest on delayed taxes or statutory payments and when it can be claimed as a deduction.

Interest on delayed payment of Income Tax

As per the Income Tax Act, 1961, if an individual or a business delays the payment of Income Tax, interest is levied under Section 234A, 234B, and 234C.

Section 234A

Interest under this section is levied when an individual or a business fails to file their Income Tax return on or before the due date. The interest rate applicable is 1% per month or part of a month from the due date of filing the return till the date of actual filing of the return.

Section 234B

Interest under this section is levied when an individual or a business fails to pay their Income Tax liability on or before the due date. The interest rate applicable is 1% per month or part of a month from the due date of payment of tax till the date of actual payment of tax.

Section 234C

Interest under this section is levied when an individual or a business fails to pay their Advance Tax on or before the due dates prescribed. The interest rate applicable is 1% per month or part of a month from the due date of payment of Advance Tax till the date of actual payment of Advance Tax.

However, the interest paid under Section 234A, 234B, and 234C cannot be claimed as a deduction under the Income Tax Act.

Interest on delayed payment of TDS

As per the Income Tax Act, 1961, if an individual or a business fails to deduct or pay TDS, interest is levied under Section 201(1A).

Section 201(1A)

Interest under this section is levied when an individual or a business fails to deduct or pay TDS. The interest rate applicable is 1.5% per month or part of a month from the due date of deduction or payment of TDS till the date of actual deduction or payment of TDS.

The interest paid under Section 201(1A) can be claimed as a deduction under the Income Tax Act if it is paid wholly and exclusively for the purpose of business or profession.

Interest on delayed payment of GST

As per the Goods and Services Tax Act, 2017, if an individual or a business fails to pay GST, interest is levied under Section 50.

Section 50

Interest under this section is levied when an individual or a business fails to pay GST. The interest rate applicable is 18% per annum or 1.5% per month or part of a month from the due date of payment of tax till the date of actual payment of tax.

The interest paid under Section 50 can be claimed as a deduction under the Goods and Services Tax Act, 2017.

Interest on delayed payment of any other statutory payment

Interest on delayed payment of any other statutory payment like Provident Fund, ESI, etc. can be claimed as a deduction under the Income Tax Act if it is paid wholly and exclusively for the purpose of business or profession.

Conclusion

Interest on delayed taxes or statutory payments like TDS, GST, Provident Fund, ESI, etc. can be claimed as a deduction under the Income Tax Act if it is paid wholly and exclusively for the purpose of business or profession. However, interest paid under Section 234A, 234B, and 234C cannot be claimed as a deduction under the Income Tax Act.