When the TDS Deduction date is later than the date of payment, it is considered as Late Deduction. Penal interest @ 1% per month is levied u/s 201(1A) of the Income Tax Act on the same. This interest is levied from the date on which tax was deductible i.e, payment date to the date on which such tax is deducted. 

Payer/ Deductor needs to pay the interest via challan no 281 before filing an e-TDS Return. Payer/ Deductor will receive a notice from the IT Department if the e-TDS return is filed without paying Late Deduction Interest.

Read More: Due Dates for TDS Filing