# Interest on Default in TDS – Section 201(1A)
This interest is mandatory (not discretionary) and is compensatory in nature.
## 1. Default Type 1 – TDS NOT Deducted (or deducted but not paid)
| Situation | Rate of Interest |
|---|---|
| TDS was deductible but not deducted | 1% per month or part of a month |
| TDS deducted but not paid to Government | 1.5% per month or part of a month |
## 2. Default Type 2 – Late Deduction / Late Payment
| Type of Default | Rate of Interest |
|---|---|
| Late deduction (deducted after due date of deduction) | 1% p.m. or part of a month |
| Late payment (deducted on time, paid after due date) | 1.5% p.m. or part of a month |
## 3. Key Principles
- 'Part of a month' is treated as full month – even one day's delay attracts a full month's interest.
- Period of interest:
- For non-deduction: from the date on which tax was deductible till the date it is actually paid.
- For late payment: from the date of deduction till the date of actual payment.
- Interest is in addition to any late filing fee (234E) or penalty (271H, 271C).
## Summary Table
```
Not deducted → 1.0% p.m. (part of month = full month)
Deducted not paid → 1.5% p.m.
Late deducted → 1.0% p.m.
Late paid → 1.5% p.m.
```
Memory hook: Deduction default = 1%; Payment default = 1.5%