TDS guide
TDS compliance guide: sections, rates, due dates and defaults
8 min readUpdated
When TDS applies to you
Any business paying salary, and most businesses crossing the audit threshold, must deduct tax at source. The sections a small business meets most often:
- 192 — salary, at average rate over the year
- 194C — contractors, with separate single-payment and annual thresholds
- 194J — professional and technical fees
- 194H — commission and brokerage
- 194I — rent of land, building, plant or machinery
- 194Q / 206C(1H) — purchase and sale of goods above the prescribed turnover and value limits
A missing or invalid deductee PAN pushes the rate to the higher statutory rate under section 206AA.
Deposit and filing calendar
Tax deducted in a month is deposited by the 7th of the next month; March deductions get until 30 April. Quarterly statements are due 31 July, 31 October, 31 January and 31 May. Certificates — Form 16 for salary, Form 16A for the rest — follow about 15 days after the statement.
The three statements
- 24Q for salary, with Annexure II in Q4 carrying each employee's full-year computation
- 26Q for resident non-salary payments
- 27Q for payments to non-residents, where treaty rates and Form 15CA/15CB come into play
What a default really means
TRACES raises a default for short deduction, short payment, late payment interest or a late filing fee under 234E of ₹200 per day. Pull the justification report, identify which component is genuine, pay what is due, and file a correction statement quoting the original token number. Most defaults trace back to a mismatched challan or a PAN that failed validation — both preventable before filing.
Practical hygiene
Collect PAN before the first payment, not at year end. Validate PANs in bulk on TRACES. Keep lower-deduction certificates under section 197 on file. Reconcile the TDS in your books against 26AS every quarter, not once a year.
Frequently asked questions
- What if I deduct TDS but deposit late?
- Interest applies at 1.5% per month from the date of deduction to the date of deposit, and the expense can be disallowed until the tax is paid.
- Is a nil TDS return required?
- A nil statement is not mandatory, but filing a nil declaration on TRACES for the quarter avoids follow-up notices.
- Who issues Form 16?
- The deductor downloads it from TRACES after filing the Q4 24Q statement — it cannot validly be prepared manually.
Want this handled by our team instead?
Outsource TDS filing