TDS Compliance

TDS rates vary by payment category: Section 192 (Salary) — as per slab; Section 194A (interest from bank FD) — 10%; Section 194B (lottery winnings) — 30%; Section 194C (contractor payments) — 1% for individuals/HUF, 2% for others; Section 194D (insurance commission) — 5%; Section 194G (lottery ticket commission) — 5%; Section 194H (commission/brokerage) — 5%; Section 194I (rent) — 10% for land/building, 2% for plant/machinery; Section 194J (professional/technical fees) — 10% (2% for technical services from April 2020); Section 194Q (purchase of goods) — 0.1% if turnover > ₹10 crore; Section 195 (non-resident payments) — as per DTAA or 30-40% otherwise. If PAN not provided: 20% or higher under Section 206AA.

TDS must be deposited by the 7th of the following month for all months. Exception: TDS deducted in March can be deposited by April 30. For TDS on property purchase (Section 194IA): within 30 days from end of the month. Penalties: Interest under Section 201(1A) at 1.5% per month from date of deduction to date of deposit (1% per month if deducted but not deducted on time). Late filing fee under Section 234E: ₹200 per day for each day of delay after due date, capped at total TDS amount. Penalty under Section 271H: ₹10,000 to ₹1,00,000 for failing to file return within 1 year. Criminal prosecution under Section 276B for failure to deposit TDS after deduction.

Form 26AS is your Annual Tax Credit Statement — a consolidated statement showing all TDS deducted on your behalf, TCS collected, advance taxes paid, and self-assessment taxes. When a deductor (your employer/payer) deducts TDS and files a quarterly return (24Q/26Q) with your PAN, the credit appears in your Form 26AS within 10-12 working days of return processing. When you file your ITR, you claim TDS credit from Form 26AS. If TDS was deducted but doesn't appear in your 26AS (because the deductor used wrong PAN or didn't file returns), you cannot claim that credit in your ITR. The Annual Information Statement (AIS) introduced in 2021 is more comprehensive — it shows financial transactions across banks, mutual funds, property registrations, and GST data — useful for both deductors and deductees.

Under Section 194C, TDS is not required if: (1) A single payment to a contractor is below ₹30,000; AND (2) The aggregate payments to the same contractor during the financial year are below ₹1 lakh. If either limit is crossed, TDS applies on all payments from the first payment. Example: If you pay ₹25,000 per month to a contractor, the annual aggregate is ₹3 lakhs — TDS applies from the first payment retroactively. Best practice: Deduct TDS from the first payment if you expect annual aggregate to exceed ₹1 lakh. Rates: 1% for individual/HUF contractors, 2% for company contractors, 2% for sub-contractors. Important: The single payment limit is ₹30,000 (not per invoice — per single occasion of payment).

Section 194Q (introduced from July 1, 2021) requires buyers with turnover exceeding ₹10 crore in the preceding year to deduct TDS @ 0.1% on purchase of goods from a resident seller if the annual purchase from that seller exceeds ₹50 lakhs. This is "TDS on buyer" as opposed to TDS usually being responsibility of the service/payment recipient's perspective. Key points: Rate is 0.1% (5% if seller doesn't have PAN); applicable only to goods (not services — those have separate TDS sections); does NOT apply if the seller has already collected TCS under Section 206C(1H); buyer must have TAN. If both Section 206C(1H) TCS (by seller) and Section 194Q TDS (by buyer) would apply, only 194Q applies. This is a relatively new compliance requirement that many businesses overlook — we ensure this is tracked in your TDS deduction matrix.