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Tax Deducted at Source (TDS)

Tax Deducted at Source (TDS) is a mechanism by which the payer deducts tax at the time of making certain payments and deposits it to the government on behalf of the payee. Any business making eligible payments — salaries, professional fees, rent, contractor payments — must deduct TDS, deposit monthly, and file quarterly returns.

10,000+
TDS Returns Filed
100%
On-Time Deposits
4.9 ★
Client Rating
0
Disallowance Notices
Service Overview

TDS Done Right — Every Month, Every Quarter

TDS is one of the most complex and penalty-prone compliance areas for Indian businesses. With over 30 TDS sections covering different payment types and rates, and strict monthly deposit deadlines, errors are common and expensive. Late TDS deposits attract 1.5% per month interest. Incorrect TDS deductions lead to disallowance of business expenses. Short deductions attract 1% per month interest plus penalty. Our team manages your complete TDS compliance — so you never face these avoidable costs.

Critical: TDS must be deposited by the 7th of the following month (March TDS by April 30). Late deposit attracts interest at 1.5% per month from the deduction date to the deposit date. Additionally, the expense on which TDS was not deducted is disallowed under Section 40(a)(ia) — increasing your taxable income by the full payment amount.

TDS on Salaries (Section 192)

Employee tax at source

Employers must deduct TDS on salary based on each employee's projected annual income and tax slab — after accounting for investments and deductions declared by the employee. Form 16 is issued annually.

TDS on Professional Fees (Section 194J)

10% on fees above ₹30,000

TDS at 10% must be deducted on professional and technical service fees (doctors, lawyers, consultants, engineers) if aggregate payment exceeds ₹30,000 in a year.

TDS on Rent (Section 194I)

10% on land/building rent above ₹2.4 lakhs

Businesses paying rent exceeding ₹2.4 lakhs per annum for land, building, furniture, or machinery must deduct TDS at 10% (2% for plant/machinery).

Quarterly TDS Return Filing

Forms 24Q, 26Q, 27Q, 27EQ

Quarterly TDS returns must be filed within 31 days of the quarter end — 24Q for salary TDS, 26Q for other TDS, 27Q for NRI payments, 27EQ for TCS.

Eligibility Criteria

Who Must Deduct TDS?

TDS obligations apply to specific types of payors making eligible payments.

1

Companies & LLPs

All companies and LLPs are mandated to deduct TDS on applicable payments regardless of turnover. Non-corporate entities are required above certain thresholds.

2

Individuals & HUFs with Accounts Audited

Individuals and HUFs whose accounts are subject to audit under Section 44AB must deduct TDS on professional fees, rent, and contractor payments.

3

Government Departments

All central and state government departments must deduct TDS on all applicable payments to contractors, consultants, and service providers.

4

Property Buyers (Section 194IA)

Buyers of immovable property (other than agricultural land) where consideration exceeds ₹50 lakhs must deduct TDS at 1% at the time of payment.

Key Benefits

Why Timely TDS Compliance Is Critical

TDS non-compliance has immediate financial and legal consequences for the deductor.

01

Avoid Interest & Penalties

Interest at 1% per month for non-deduction and 1.5% per month for non-deposit applies. On top of this, a penalty equal to the TDS amount can be levied under Section 271C.

02

Expense Deductibility

Expenses on which TDS was not deducted may be disallowed under Section 40(a)(ia) — increasing taxable income by the full payment amount. This is a massive hidden cost.

03

Payee Credit

Payees (employees, vendors, contractors) rely on your TDS deposits for their Form 26AS credit. Incorrect or delayed deposits create problems for their individual tax returns.

04

Avoid Prosecution

Failure to deposit TDS after deduction is deemed a criminal offence under Section 276B — punishable with imprisonment of 3 months to 7 years plus fine.

05

Prevent Lower Deduction Notices

Incorrect TDS deductions (short deduction) result in demand notices from the Income Tax Department. Our calculations use correct rates for every payment type.

06

Smooth Vendor Relations

Vendors and contractors check their Form 26AS regularly. Accurate, timely TDS deposits prevent friction in vendor relationships and speed up future invoice payments.

Step-by-Step Process

Monthly TDS Compliance Process

Our TDS management team handles the complete monthly and quarterly cycle for your business.

Your journey Step 1 of 6

Scroll through the steps — or skip the queue and let our experts handle every one of them for you.

Get Expert Help
1
Step 1 of 6

Identify Applicable Payments

Review all payments made during the month — salaries, professional fees, rent, contractor payments, interest — and identify TDS applicability and correct rates.

2
Step 2 of 6

Calculate TDS

Apply the correct TDS rate to each payment type. For salaries, compute tax based on each employee's estimated annual income and investment declarations.

3
Step 3 of 6

Deposit TDS Challan

Deposit TDS using Challan 281 by the 7th of the following month (by April 30 for March). Use the correct minor head codes for each TDS section.

4
Step 4 of 6

Update TAN-Linked Records

Maintain employee-wise / payee-wise deduction records with PAN, amount, rate, and challan details for quarterly return preparation.

5
Step 5 of 6

File Quarterly TDS Return

File Form 24Q (salary), 26Q (other), 27Q (NRI) by the 31st after each quarter end. Q4 deadline is May 31. FVU validation and RPU software ensure error-free submission.

6
Step 6 of 6

Issue TDS Certificates

Issue Form 16 (salary) by June 15 and Form 16A (non-salary) within 15 days of quarterly return filing. These certificates are critical for employees and vendors.

Document Checklist

Documents & Data for TDS Compliance

Monthly payroll and payment data is needed to calculate and deposit TDS accurately.

Monthly Payment Data

Salary Payroll

Employee-wise monthly salary breakup including basic, HRA, and other allowances.

Vendor Payment Register

All payments made to contractors, professionals, and service providers during the month.

Rent Agreements

Property rent agreements showing monthly rent amount and landlord's PAN.

TDS at the higher rate of 20% applies if the payee fails to furnish their PAN. Always collect PAN before making the first payment to any vendor or contractor to avoid excess TDS deduction issues.

Post Registration

Year-End TDS Actions

Complete these actions by the year-end to close out the TDS cycle cleanly.

By June 15

Issue Form 16 & 16A

Issue Form 16 to all salaried employees by June 15. Issue Form 16A to all non-salary TDS deductees within 15 days of the Q4 return due date (by June 15).

After Q4 filing

Reconcile Form 26AS

Match all TDS deposited in the government records (Form 26AS) against your books. Any discrepancy must be corrected by filing a TDS correction statement.

As needed

File TDS Correction Statements

If errors are found in filed TDS returns — wrong PAN, wrong amount, or challan mismatch — file correction statements promptly. Uncorrected errors create demand notices.

Why Finace India?

Your Trusted TDS Compliance Partner

Miss the 7th-of-the-month deposit deadline and interest runs at 1.5% per month — plus the expense itself gets disallowed under Section 40(a)(ia). We deposit and file on time, every month.

Monthly Deposit Discipline

TDS calculated and deposited before the 7th of every month, with March covered by the April 30 extension.

Quarterly Return Accuracy

24Q, 26Q and other TDS returns filed correctly so payee credit reflects properly in Form 26AS.

Section 40(a)(ia) Protection

Correct deduction on every eligible payment so expenses are never disallowed for non-deduction.

Vendor Relationship Support

Certificates issued promptly so your vendors and employees see accurate TDS credit without chasing you.

10,000+

TDS Returns Filed

100%

On-Time Deposits

4.9 ★

Client Rating

0

Disallowance Notices

4.9 / 5from 2,400+ verified reviews
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FAQ

Frequently Asked Questions

Non-deposit of TDS after deduction is a criminal offence under Section 276B — punishable with rigorous imprisonment of 3 months to 7 years plus fine. Civil interest at 1.5% per month also applies.
If the payee fails to provide their PAN, TDS must be deducted at 20% (or the applicable rate, whichever is higher) under Section 206AA. Higher rate TDS is not refundable until the payee files their ITR.
Yes. If excess TDS was deducted from salary, the employee can claim a refund by filing their ITR and showing actual tax liability lower than TDS deducted. The refund is credited to their bank account.
Yes. TDS under Section 195 applies on most payments to non-residents — royalties, interest, technical services fees, etc. DTAA may reduce the rate. Filing Form 15CA/15CB is mandatory for most foreign remittances.
TDS under Section 194J is deducted at 10% for professional fees (doctors, lawyers, consultants, engineers). Technical services attract 2% TDS. The threshold is ₹30,000 per person per year.

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