1. The Legal Basis
| Rule | Requirement |
|---|---|
| Rule 7(2) | Monthly return (Form-J) within 7 days of expiry of the preceding month |
| Rule 3(7) | ED to be deposited within 30 days of expiry of the month of generation, under head 0043-00-101-0034-01006-000 |
| Section 5 | If ED is not paid within the prescribed period, interest @ 18% per annum is payable on the unpaid amount, from expiry of the period until actual payment |
| Practice | The bank transaction date on the Treasury e-Challan is taken as the date of payment — not the challan generation date |
2. How the Calculator's Waterfall Works
Every rupee received is adjusted in this fixed order, exactly as the calculator does it:
- Interest— already accrued and unpaid, cleared first
- Arrear— dues that are 2+ months old
- Previous Month Due— dues that are 1 month old
- Current Month Due
- Extra— advance, if anything is left over
A month's "Current Month Dues" ages through the ledger: in Month 2 it becomes Previous Month; if still unpaid in Month 3, it becomes Arrear — and from that point it starts drawing daily simple interest @ 18% p.a. (amount × 18% ÷ 365 × days unpaid) until paid.
3. The Example Ledger
Consumer: M/s Sample Industries · Rate: 18% p.a. simple interest · Opening balance: Nil
Monthly dues entered
| Month | Current Month Dues | Payable by (30 days from month-end) |
|---|---|---|
| May-2025 | ₹1,00,000.00 | ~30-Jun-2025 |
| Jun-2025 | ₹1,20,000.00 | ~30-Jul-2025 |
| Jul-2025 | ₹90,000.00 | ~30-Aug-2025 |
| Aug-2025 | ₹1,50,000.00 | ~30-Sep-2025 |
Payments made (bank transaction date, as per e-Challan)
| # | Date Paid | Amount | Intent |
|---|---|---|---|
| 1 | 20-Jun-2025 | ₹1,00,000.00 | Toward May dues — within the 30-day window, no interest |
| 2 | 20-Aug-2025 | ₹60,000.00 | Toward Jun dues — ~51 days after the 30-Jul due date, partial |
| 3 | 25-Aug-2025 | ₹90,000.00 | Toward Jul dues |
| 4 | 15-Sep-2025 | ₹61,400.00 | Clearing remaining Jun arrear + accrued interest |
| 5 | 25-Sep-2025 | ₹1,50,000.00 | Toward Aug dues |
4. Complete Report — Month by Month
| Month | Current Month | Prev Month | Arrear | Interest (this month) | Int. Carry | Total Interest | Payment Received | Balance | Outstanding at month-end |
|---|---|---|---|---|---|---|---|---|---|
| May-25 | 1,00,000.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 1,00,000.00 | 0.00 |
| Jun-25 | 1,20,000.00 | 1,00,000.00 | 0.00 | 0.00 | 0.00 | 0.00 | 1,00,000.00 | 1,20,000.00 | 0.00 |
| Jul-25 | 90,000.00 | 1,20,000.00 | 0.00 | 0.00 | 59.18 | 59.18 | 0.00 | 2,10,059.18 | 1,20,059.18 |
| Aug-25 | 1,50,000.00 | 90,000.00 | 1,20,000.00 | 1,334.43 | 30.25 | 1,364.67 | 1,50,000.00 | 2,11,364.67 | 61,364.67 |
| Sep-25 | 0.00 | 1,50,000.00 | 61,334.43 | 455.62 | 0.00 | 455.62 | 2,11,400.00 | 390.05 | 390.05 |
Reading this table
- May-25 — dues just raised; nothing due yet, so outstanding is nil.
- Jun-25 — May's ₹1,00,000 is paid in full on 20-Jun, comfortably inside the 30-day window → zero interest. June's own ₹1,20,000 becomes due.
- Jul-25 — June's ₹1,20,000 is still unpaid as the month closes. Since July has 31 days, the moment the 30-day grace has run out, interest starts: ₹59.18 — one day's interest on ₹1,20,000 (₹1,20,000 × 18% ÷ 365 = ₹59.18/day). This is carried forward as Int. Carry.
- Aug-25 — June's dues have now aged into Arrear (₹1,20,000) and start drawing daily interest continuously. July's dues (₹90,000) sit as Previous Month. Two payments land this month — by month-end, ₹61,364.67 is still outstanding, of which ₹30.25 is interest and the rest is unpaid principal.
- Sep-25 — The remaining balance from July (₹61,334.43) has aged into Arrear; August's ₹1,50,000 sits as Previous Month. Two final payments (₹61,400 + ₹1,50,000 = ₹2,11,400) clear almost everything, leaving a small residual of ₹390.05 — the extra day or two of interest that accrued between month-end and the actual payment dates, exactly as Section 5 intends: interest runs every single day the amount stays unpaid, not just at month-ends.
5. Payment-by-Payment Adjustment (the waterfall in action)
| Payment | Amount | No. of Days Interest Calculated | → Interest | → Arrear | → Prev Month | → Current | → Extra |
|---|---|---|---|---|---|---|---|
| 20-Jun-25 | 1,00,000.00 | 0 days (paid within grace period) | 0.00 | 0.00 | 1,00,000.00 | 0.00 | 0.00 |
| 20-Aug-25 | 60,000.00 | 20 days (31-Jul to 19-Aug, on ₹1,20,000) | 1,183.56 | 58,816.44 | 0.00 | 0.00 | 0.00 |
| 25-Aug-25 | 90,000.00 | 5 days (20-Aug to 24-Aug, on ₹61,183.56) | 150.86 | 61,183.56 | 28,665.57 | 0.00 | 0.00 |
| 15-Sep-25 | 61,400.00 | 15 days (31-Aug to 14-Sep, on ₹61,334.43) | 453.71 | 60,946.29 | 0.00 | 0.00 | 0.00 |
| 25-Sep-25 | 1,50,000.00 | 10 days (15-Sep to 24-Sep, on ₹388.13) | 1.91 | 388.13 | 1,49,609.95 | 0.00 | 0.00 |
What this shows
- 20-Jun — paid on time, nothing has aged into arrear or attracted interest yet, so the whole ₹1,00,000 goes straight to clearing May's (then "Previous Month") dues.
- 20-Aug — this is a late, partial payment. Because interest always has first claim, ₹1,183.56 is skimmed off for interest already accrued on the aged June dues, and only the balance (₹58,816.44) reduces the arrear principal — the ₹1,20,000 arrear is not yet fully cleared.
- 25-Aug — same day's interest (₹150.86) is cleared first, then the remaining June arrear (₹61,183.56) is fully wiped out, and only the leftover (₹28,665.57) starts chipping into July's Previous-Month dues.
- 15-Sep — clears the interest that had built up (₹453.71) plus the rest of what had aged into Arrear (₹60,946.29) — this finally closes out July's dues completely.
- 25-Sep — a nearly-exact payment for August's ₹1,50,000, but a tiny ₹1.91 of interest and ₹388.13 of arrear (carried over from the days between 15-Sep and 25-Sep) get paid first, so ₹390.05 of August's dues remains technically outstanding at period end.
6. Outstanding Summary — as of Sep-2025
| Outstanding ED due | ₹390.05 |
| — of which Interest (Int. Carry) | ₹0.00 |
| — of which Arrear/Principal | ₹390.05 |
| Total payment adjusted toward interest across all 5 payments | ₹1,790.04 |
| Total payments received | ₹4,61,400.00 |
7. Takeaways for Reading Any Real Ledger
- "Days" isn't tracked as one number per month — interest is genuinely computed day by day on whatever amount is currently sitting unpaid, at rate = 18% ÷ 365 per day. A month with 31 days (Jan/Mar/May/Jul/Aug/Oct/Dec) has one extra day of exposure compared to a 30-day month.
- The 30-day grace period only protects "Current" and "Previous Month" dues — the moment an amount ages into Arrear (stays unpaid for two months), it draws interest continuously, with no further grace.
- A payment never lets you "choose" what it pays off — the calculator (and, per Section 5, the underlying rule) always sweeps interest first, then the oldest principal (Arrear), then Previous Month, then Current. This is why a payment that exactly matches one month's dues can still leave a small shortfall if any interest or older arrear existed.
- Even a fully "timely" payment can show a few rupees of interest if it lands even one day after the amount has started aging — as seen in the final ₹390.05 above.
This structure is exactly what the Complete Report tab in the calculator will produce if you enter the same months and payments — you can cross-check by using "Add month" / "Add payment" with the figures in Section 3.