Tax Deducted at Source (TDS) has over 30 payment categories — each with different rates, thresholds, and due dates. One mistake creates penalties, interest, and disallowed deductions. Acculex's expert team manages your complete TDS compliance cycle every month.
TDS (Tax Deducted at Source) is a mechanism where the payer deducts income tax from certain payments — salaries, contractor payments, rent, professional fees, interest — and deposits it with the government. The deductor acts as the government's tax collector and must: deduct the right amount, deposit it by the 7th of every month (March by 30th April), file quarterly returns, and issue TDS certificates to payees.
Under Section 40(a)(ia) of the Income Tax Act, if you make a payment to a vendor, contractor, or professional on which TDS was required to be deducted but wasn't — 30% of that expense is permanently disallowed while computing your taxable income. For a business paying ₹10 lakh in contract work without deducting TDS, this means ₹3 lakh is added back to income — generating a ₹90,000+ extra tax liability (at 30%). This disallowance is over and above TDS penalties and interest.
| Section | Nature of Payment | TDS Rate (Individual) | TDS Rate (Company) | Threshold Limit |
|---|---|---|---|---|
| 192 | Salary | As per slab | As per slab | Basic exemption limit |
| 194 | Dividends | 10% | 10% | ₹5,000 per year |
| 194A | Interest (Bank FD) | 10% | 10% | ₹50,000 (senior citizen) / ₹40,000 (others) |
| 194C | Contractor / Sub-contractor payments | 1% | 2% | ₹30,000 per payment / ₹1,00,000 aggregate |
| 194H | Commission or Brokerage | 5% | 5% | ₹15,000 per year |
| 194I | Rent — Land/Building | 10% | 10% | ₹2,40,000 per year |
| 194I | Rent — Plant, Machinery, Equipment | 2% | 2% | ₹2,40,000 per year |
| 194J | Professional / Technical fees | 10% | 10% | ₹30,000 per year |
| 194J | Call centre payments | 2% | 2% | ₹30,000 per year |
| 194N | Cash withdrawal above threshold | 2% (above ₹3Cr) | 2% | ₹1Cr (regular ITR filers) / ₹20L (non-filers) |
| 194Q | Purchase of goods | 0.1% | 0.1% | Buyer's turnover > ₹10Cr; purchase ≥ ₹50L/vendor |
| 194R | Benefits or perquisites to business | 10% | 10% | ₹20,000 per year per recipient |
| 195 | Payments to Non-Residents | As per DTAA / 20%+ | As per DTAA | Any amount — no threshold for NR payments |
Note: TDS rates may be lower under applicable DTAA for non-resident payments. PAN not provided = higher TDS (20% or maximum marginal rate). Rates shown are for FY 2025-26.
Quarterly return for TDS deducted on salary payments (Section 192). Includes employee-wise salary, deductions, tax regime selected, and TDS deposited. Due: Q1 31 Jul | Q2 31 Oct | Q3 31 Jan | Q4 31 May.
Quarterly return for all domestic non-salary TDS — contractors (194C), rent (194I), professional fees (194J), interest (194A), commission (194H), and all others. Same quarterly due dates as 24Q.
Quarterly return for all payments to non-residents under Section 195 and other applicable sections. Requires DTAA treaty details, foreign TRC, and Form 10F if applicable. Critical for compliance in businesses with international vendors.
Quarterly return for Tax Collected at Source — applicable to sellers of certain goods (scrap, alcohol, motor vehicles), tour operators, e-commerce operators (Section 206C). Separate from TDS — collected by the seller, not the buyer.
Annual TDS certificate issued to each salaried employee — Part A from TRACES + Part B prepared by employer. Issued by 15th June after financial year-end. Employees use this for ITR filing.
Quarterly TDS certificate for non-salary deductions — issued to contractors, professionals, landlords, etc. after each quarter. Downloaded from TRACES portal with certificate number. Issued within 15 days of due date of each quarterly return.
| Default | Section | Penalty / Interest |
|---|---|---|
| TDS not deducted at all | Section 201(1) | Full TDS amount treated as short payment + interest at 1% per month from due date of deduction to date of deduction |
| TDS deducted but deposited late | Section 201(1A) | Interest at 1.5% per month from date of deduction to date of deposit. Calculated on day basis — every part-month counts as full month. |
| TDS return filed late | Section 234E | ₹200 per day for every day of delay. Minimum: actual TDS amount. Maximum: TDS amount. Computed automatically by TRACES — auto-deducted from refunds. |
| TDS return not filed at all | Section 271H | Penalty of ₹10,000 to ₹1,00,000 in addition to Section 234E late fee. |
| Expense disallowance (no TDS deducted) | Section 40(a)(ia) | 30% of the payment permanently disallowed as a business expense — added back to taxable income. Applies for the year TDS was not deducted. |
| Wrong PAN or no PAN in TDS return | Section 206AA | TDS must be at higher of: prescribed rate, 20%, or maximum marginal rate — if payee's PAN is not provided. Mismatch in TDS return = demand on deductor. |
We review all your payment categories and determine exact TDS sections, rates, and thresholds applicable — before payments are made.
Compute TDS on all applicable payments — salary, contractors, rent, professional fees, commission — for every vendor and employee.
TDS deposited with government via Challan 281 by the 7th of every month (30th April for March). Challan details maintained for each payment type.
Form 24Q (salary), 26Q (domestic non-salary), 27Q (non-residents), and 27EQ (TCS) filed accurately every quarter within due dates on TRACES portal.
Form 16 for employees (by 15 June) and Form 16A for all other deductees — downloaded from TRACES and shared with each payee.
Monthly reconciliation of TDS deposited vs challan entries on TRACES. Any mismatches corrected via revised returns before they generate notices.
Apply to AO for a lower or nil TDS certificate for your regular vendors — reducing their TDS deduction burden where total income is below taxable threshold.
Respond to TDS mismatch notices, short deduction demands, and TRACES queries — with accurate reconciliation and revised returns where needed.
TDS deducted during any month (other than March) must be deposited with the government by the 7th of the following month. For TDS deducted in March: deposited by 30th April. For TDS deducted on property purchase: deposited within 30 days from end of month in which deduction was made using Form 26QB. Late deposit attracts interest at 1.5% per month (every part-month counts as full month) — this interest is NOT deductible as a business expense.
Under Section 197, a vendor (payee) can apply to their Assessing Officer for a certificate authorising a lower rate of TDS or nil TDS — if their total income is below the taxable limit or if they have substantial business losses. If the vendor provides you with a valid Form 13 lower deduction certificate, you must deduct TDS at the rate specified in the certificate (not the standard rate) for the period mentioned. You must update this in your TDS return. Acculex helps both deductors and deductees with Section 197 applications.
Section 194Q (applicable from July 2021) requires any buyer with turnover exceeding ₹10 crore in the preceding financial year to deduct TDS at 0.1% on payments to any single seller exceeding ₹50 lakh in a year. This applies on the amount exceeding ₹50L. Note: if the seller is required to collect TCS under Section 206C(1H), Section 194Q TDS is not applicable — only one section applies. This section has specific exclusions and is often confused with Section 206C(1H) TCS — our team determines which section applies for each vendor relationship.
Complete TDS compliance — computation, challan deposit, quarterly returns, Form 16/16A, TRACES reconciliation. Managed by our CA team every month.