TDS Guide for Businesses — Rates, Due Dates & Filing Process
By Parul Singh, GST Practitioner · TDS · Updated June 2026
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What is TDS (Tax Deducted at Source)?
I handle TDS compliance for 50+ Delhi businesses. The most common mistake is not deducting at all -- penalty under Section 271C equals the TDS amount. TDS is a mechanism where the payer deducts tax before making payment and deposits it with the government. It ensures the government collects tax at the source of income itself.
Official Reference: Chapter XVII-B of the Income Tax Act 1961 contains TDS provisions. Sections 192-196D specify different TDS sections for different types of payments. Section 200 mandates deposit of TDS with the government. Section 203 requires issuance of TDS certificates.
Key TDS Rates for Businesses
| Section | Payment Type | TDS Rate | Threshold |
|---|---|---|---|
| 192 | Salary | Slab rates | ₹2,50,000 (basic exemption) |
| 194A | Interest other than securities | 10% | ₹5,000 |
| 194C | Contractor payment | 1%/2% | ₹30,000 single / ₹1,00,000 annual |
| 194H | Commission | 5% | ₹15,000 |
| 194J | Professional/technical fees | 10% | ₹30,000 |
| 194I | Rent | 10%/2% | ₹2,40,000 |
| 194Q | Purchase of goods | 0.1% | ₹50 lakh |
📍 Real Example -- TDS Calculation -- Connaught Place Office
A company in Connaught Place makes these monthly payments:
• Salary to 10 employees: ₹8,00,000 (TDS as per slabs: ₹1,20,000)
• Professional fees to CA: ₹50,000 (TDS 194J: ₹5,000)
• Office rent: ₹1,50,000 (TDS 194I: ₹15,000 for building rent)
• Contractor: ₹2,00,000 (TDS 194C: ₹2,000 for individual contractor)
• Monthly total TDS: ₹1,42,000
• Must be deposited by 7th of next month
• Salary to 10 employees: ₹8,00,000 (TDS as per slabs: ₹1,20,000)
• Professional fees to CA: ₹50,000 (TDS 194J: ₹5,000)
• Office rent: ₹1,50,000 (TDS 194I: ₹15,000 for building rent)
• Contractor: ₹2,00,000 (TDS 194C: ₹2,000 for individual contractor)
• Monthly total TDS: ₹1,42,000
• Must be deposited by 7th of next month
TDS Due Dates
| Compliance | Due Date |
|---|---|
| TDS payment | 7th of next month (30th April for March) |
| TDS return Q1 (Apr-Jun) | 31st July |
| TDS return Q2 (Jul-Sep) | 31st October |
| TDS return Q3 (Oct-Dec) | 31st January |
| TDS return Q4 (Jan-Mar) | 31st May |
| Form 16 (salary) | 15th June |
| Form 16A (non-salary) | 15th of next month after quarter |
⚠️ Common Mistake: The most expensive TDS mistake: not deducting TDS when required. Under Section 271C, penalty equals the TDS amount. Plus, under Section 40(a)(i), the entire expense is disallowed as a deduction -- meaning you pay 30% tax on that amount as well. For a ₹10 lakh payment without TDS: ₹1 lakh penalty + ₹3 lakh tax disallowance = ₹4 lakh total cost!
Filing TDS Returns
- Deduct TDS at the applicable rate before making payment
- Deposit TDS to the government via NSDL (tin-nsdl.com) by the 7th
- File TDS return quarterly -- Form 24Q (salary), 26Q (non-salary), 27Q (NRI payments)
- Issue TDS certificates -- Form 16 (salary) by 15th June, Form 16A (non-salary) quarterly
Official Reference: Section 200 requires the deductor to deposit TDS with the government. Rule 30 prescribes the time limit (7th of next month). Rule 31A provides the quarterly return filing procedure. Section 203 mandates issuance of TDS certificates.
📍 Real Example -- Monthly TDS Compliance -- Okhla Manufacturing Unit
An Okhla manufacturing unit with 25 employees and various vendors:
1st-5th: Calculate TDS on all payments made during the month
6th: Deposit TDS via NSDL challan (ITNS-281)
7th: Deadline for TDS payment
Monthly TDS outflow: ₹3,50,000 (salary) + ₹45,000 (vendors) = ₹3,95,000
Quarterly: File TDS returns (24Q + 26Q) and issue Form 16A
1st-5th: Calculate TDS on all payments made during the month
6th: Deposit TDS via NSDL challan (ITNS-281)
7th: Deadline for TDS payment
Monthly TDS outflow: ₹3,50,000 (salary) + ₹45,000 (vendors) = ₹3,95,000
Quarterly: File TDS returns (24Q + 26Q) and issue Form 16A
TDS Penalties
| Violation | Penalty |
|---|---|
| Non-deduction of TDS | Equal to TDS amount (Section 271C) |
| Non-deposit after deduction | Equal to TDS amount (Section 271C) + interest 1.5%/month |
| Late filing of return | ₹200/day under Section 234E (capped at TDS amount) |
| Non-filing of return | ₹10,000 to ₹1,00,000 under Section 271H |
| Non-issuance of TDS certificate | ₹100/day per certificate under Section 272A |
💡 Pro Tip from Parul: I handle end-to-end TDS compliance for businesses -- monthly deduction, deposit, quarterly returns, Form 16/16A generation -- starting at ₹2,499/quarter. Call/WhatsApp: +91 95401 04776
Common TDS Mistakes
- Not deducting TDS -- most dangerous, leads to disallowance + penalty
- Wrong TDS rate -- using 10% instead of 2% for rent (residential vs commercial)
- Wrong PAN -- TDS at 20% instead of normal rate if PAN is incorrect
- Late deposit -- interest at 1.5% per month from deduction date to deposit date
- Not filing returns -- ₹10,000 to ₹1,00,000 penalty under Section 271H
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Frequently Asked Questions
What is the TDS rate if PAN is not available?
If the payee does not provide PAN, TDS must be deducted at the higher of: (1) the normal rate, or (2) 20%. This is mandated under Section 206AA. For professional fees (194J), the normal rate is 10%, but without PAN, it becomes 20%.
Can TDS be avoided by getting a lower deduction certificate?
Yes, under Section 197, you can apply to the Assessing Officer for a certificate authorizing deduction at a lower rate or nil rate. This is useful when your total tax liability is expected to be lower than the TDS rate. Apply online through TRACES.
What is Section 194Q TDS on purchase of goods?
Section 194Q requires a buyer (turnover > ₹10 crore in previous year) to deduct 0.1% TDS on purchase of goods exceeding ₹50 lakh from a resident seller. This was introduced in 2021 and catches many businesses off guard.
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