Tax Deduction at Source (TDS) Compliance
A guide to Deductor responsibilities, forms, due dates, and penalties.
TDS (Tax Deduction at Source) Overview
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What Is TDS?
A person (Deductor) who is liable to make payment of specified nature to any other person (deductee) shall deduct tax at source and remit the same into the account of the Central Government. The deductee from whose income tax has been deducted at source would be entitled to get credit of the amount so deducted on the basis of Form 26AS or TDS certificate issued by the deductor.
Different Types of TDS Forms
- Form 24Q: TDS on Salaries.
- Form 26Q: TDS on payments other than salaries.
- Form 27Q: TDS on payments made to Non-Residents.
- Form 27EQ: TCS (Tax Collected at Source).
Delay
- After depositing TDS, the challan from OLTAS takes 2–3 days to process. Deposit TDS 3–4 days before the 7th to avoid late fees.
Late Filing Fee (Section 234E)
- If a person fails to file the TDS/TCS return on or before the due date, late fees apply.
- Rs 200 per day is charged for every day the delay continues.
- The late fee cannot exceed the TDS amount for that period.
- Return cannot be filed without paying the late filing fee.
- Rs 200/day is a mandatory late filing fee, not a penalty.
Who Will File Return?
It is the duty of the person who is making payment to someone for specified goods or services to deduct TDS and file TDS return. The specified payment includes salary, interest, commission, brokerage, professional fees, royalty, contract payments, etc. The person who deducts TDS is called deductor and the person whose tax is being deducted is called deductee.
Key Recent TDS/TCS Sections
Sec 194Q (w.e.f 01.07.2021)
194 Q is applicable on Any person, being a buyer whose total sales/gross receipts/turnover from the business carried on by him exceed 10 crore rupees during the F.Y. immediately preceding the F.Y. in which the purchase of goods is carried out, not being a person, as the Central Government may, by notification in the Official Gazette, specify for this purpose, subject to such conditions as may be specified therein. and who is responsible for paying any sum to any resident (i.e. seller) for purchase of any goods of the value or aggregate of such value exceeding fifty lakh rupees in any previous year.
Sec 194S (w.e.f 01.07.2022)
In line with the existing TDS section 194IA requiring deduction of tax at source @ 1% on purchase of any immovable property exceeding rupees fifty lakhs in a year, the Finance Bill 2022, has proposed a new section 194S applicable w.e.f. 1.7.2022, mandating deduction of tax at source @ 1% on the payment of purchase consideration to a resident person, on transfer of a virtual digital asset, as defined in another new section 2(47A).
Sec 194R (w.e.f 01.07.2022)
The section mandates a person, who is responsible for providing any benefit or perquisite to a resident, to deduct tax at source @10% of the value or aggregate of value of such benefit or perquisite, before providing such benefit or perquisite. The benefit or perquisite may or may not be convertible into money but should arise either from carrying out of business, or from exercising a profession, by such resident. This deduction is not required to be made, if the value or aggregate of value of the benefit or perquisite provided or likely to be provided to the resident during the financial year does not exceed twenty thousand rupees .
Comprehensive TDS Rate Chart (FY 2023-24)
(R=Resident, NR=Non-Resident, FC=Foreign Company)
| Section | Deductee | Nature of transaction | Threshold Limit (Rs) | TDS Rate |
|---|---|---|---|---|
| 192 | R, NR | Payment of salary | Basic exemption limit of employee | Normal slab rates |
| 192A | R, NR | Premature withdrawal from EPF | 50,000 | 10% |
| 193 | R |
Interest on securities
• Debentures • 8% Savings (Taxable) Bonds 2003 or 7.75% Savings (Taxable) Bonds 2018 • Other securities |
Debentures: 5,000 8%/7.75% Bonds: 10,000 Other securities: No limit |
10% |
| 194 | R | Payment of any dividend | 5,000 | 10% |
| 194A | R | Interest other than interest on securities (deposits with banks/post office/co-op society) |
Senior citizens: 50,000 Others: 40,000 |
10% |
| 194A | R | Interest from persons (e.g., friends/relatives) other than banks/post office/co-op or securities u/s 193 | 5,000 | 10% |
| 194B | R, NR, FC | Income from lottery winnings, card games, crossword puzzles, other games | 10,000 | 30% |
| 194BB | R, NR, FC | Income from horse race winnings | 10,000 | 30% |
| 194C | R | Payment to contractor/sub-contractor (Individuals/HUF) |
Single transaction: 30,000 Aggregate: 1,00,000 |
1% |
| 194C | R | Payment to contractor/sub-contractor (Other than Individuals/HUF) |
Single transaction: 30,000 Aggregate: 1,00,000 |
2% |
| 194D | R | Insurance commission to domestic companies | 15,000 | 10% |
| 194D | R | Insurance commission to others (non-companies) | 15,000 | 5% |
| 194DA | R | Payment in respect of life insurance pay-out | 1,00,000 | 5% |
| 194E | NR, FC | Payment to non-resident sportsmen / sports association | No limit | 20% |
| 194EE | R, NR | Payment of amount standing to credit under National Savings Scheme (NSS) | 2,500 | 10% |
| 194F | R, NR | Payment for repurchase of unit by UTI or Mutual Fund | No limit | 20% |
| 194G | R, NR, FC | Payments/commission on sale of lottery tickets | 15,000 | 5% |
| 194H | R | Commission or brokerage | 15,000 | 5% |
| 194-I | R | Rent — Land / Building / Furniture / Fitting | 2,40,000 | 10% |
| 194-I | R | Rent — Plant & Machinery | 2,40,000 | 2% |
| 194-IA | R | Payment in consideration of transfer of certain immovable property (other than agricultural land) | 50,00,000 | 1% |
| 194-IB | R | Rent payment by Individual or HUF not covered u/s 194-I | 50,000 per month | 5% |
| 194-IC | R | Payment under Joint Development Agreements (JDA) to Individual/HUF | No limit | 10% |
| 194J | R | Fees for professional services / remuneration / director fees / commission / non-compete / know-how / patent / copyright | 30,000 | 10% (general) |
| 194J | R | Fees for technical services / royalty for film / call-centre technical services | 30,000 | 2% |
| 194K | R | Payment of income for units of a mutual fund (e.g., dividend) | No limit | 10% |
| 194LA | R | Payment in respect of compensation on acquiring certain immovable property | 2,50,000 | 10% |
| 194LB | NR, FC | Payment of interest on infrastructure debt fund to Non-Resident | No limit | 5% |
| 194LC | NR, FC | Payment of interest on loan borrowed in foreign currency by Indian co./business trust against loan agreement or issue of long-term bonds | No limit | 5% |
| 194LC | NR, FC | Payment of interest for long-term bonds listed in IFSC | No limit | 4% |
| 194LD | NR, FC | Payment of interest on rupee-denominated bond to FII or QFI | No limit | 5% |
| 194LBA (1) | R | Certain income distributed by a business trust to its unitholder | No limit | 10% |
| 194LBA (2) | NR, FC | Interest income of a business trust from SPV distribution to unitholders | No limit | 5% |
| 194LBA (2) | NR, FC | Dividend income of business trust from SPV (excl. capital held by govt) | No limit | 10% |
| 194LBA (3) | NR | Rental income payment of assets owned by business trust to unitholders | No limit | 30% |
| 194LBA (3) | FC | Rental income payment of assets owned by business trust to unitholders (Foreign Co.) | No limit | 40% |
| 194LBB | R, NR | Certain income paid to a unitholder in respect of units of an investment fund | No limit | 10% |
| 194LBB | FC | Certain income paid to unitholder in respect of units of an investment fund (Foreign Co.) | No limit | 40% |
| 194LBC | R | Income from investment in securitisation fund received by Individual/HUF | No limit | 25% |
| 194LBC | R | Income from investment in securitisation fund received by domestic company | No limit | 10% |
| 194LBC | FC | Income from investment in securitisation fund received by foreign company | No limit | 40% |
| 194LBC | NR | Income from investment in securitisation fund received by NRI | No limit | 10% |
| 194M | R | Certain payments by Individual/HUF not liable under 194C/194H/194J | 50,00,000 | 5% |
| 194N | R, NR | Cash withdrawal exceeding a certain amount | 1,00,00,000 (1 crore) | 2% |
| 194N (special) | R, NR | Cash withdrawal by person not filing ITR for last 3 years (on expiry of original ITR due date) | 20,00,000 to 1,00,00,000 | 2% (20L–1Cr) / 5% (if applicable per rules) |
| 194O | R | Payment for sale of goods or provision of services by e-commerce operator through its platform | 5,00,000 | 1% |
| 194P | R | Payment of pension or interest to specified senior citizens (age 75+) | Basic exemption limit of senior/super senior citizens | Normal tax slab rates |
| 194Q | R | Payments for purchase of goods (buyer threshold) | 50,00,000 | 0.10% |
| 194R | R | Perquisite or benefit to a business or profession | 20,000 | 10% |
| 194S | R | TDS on transfer of Virtual Digital Assets (VDA) |
Specified persons: 50,000 Others: 10,000 |
1% |
| 195 | NR | Income on investments made by NRI citizen | No limit | 20% |
| 195 | NR | Income by way of LTCG referred to in section 115E (NRI) | No limit | 10% |
| 195 | NR, FC | Income by way of LTCG under section 112(1)(c)(iii) | No limit | 10% |
| 195 | NR, FC | Income by way of LTCG under section 112A | No limit | 10% |
| 195 | NR, FC | Income by way of STCG under section 111A | No limit | 15% |
| 195 | NR, FC | Any other income by way of LTCG | No limit | 20% |
| 195 | NR, FC | Interest payable on money borrowed by government or Indian concern in foreign currency | No limit | 20% |
| 195 | NR, FC | Income from royalty payable by Indian concern/government for specific copyrights or computer software | No limit | 10% |
| 195 | NR | Income from royalty payable by government/Indian concern under industrial policy agreement (pre-1 Apr 1976 case) | No limit | 50% |
| 195 | FC | Income from royalty payable by government/Indian concern under industrial policy agreement (post-31 Mar 1976) | No limit | 10% |
| 195 | NR | Income from technical fees payable by government/Indian concern under industrial policy agreement (pre-1 Apr 1976) | No limit | 50% |
| 195 | FC | Income from technical fees payable by government/Indian concern under industrial policy agreement (post-31 Mar 1976) | No limit | 10% |
| 195 | NR, FC | Any other income | No limit | 30% (NR) / 40% (FC) |
| 196B | NR, FC | Income (including LTCG) from units of an offshore fund | No limit | 10% |
| 196C | NR, FC | Income (including LTCG) from foreign currency bonds or GDR of an Indian company | No limit | 10% |
| 196D | NR, FC | Income (excluding dividend and capital gain) from Foreign Institutional Investors (FIIs) | No limit | 20% |
Simple & Transparent Pricing for Tds Return Filing
Scale your features as your business grows. Find the plan that fits your needs today.
Basic Plan
inclusive of GST
- TDS return filing for one quarter.
- Import from any accounting software or excel.
- Manual data limited up to four deductions only.
- TDS certificate generation
- Traces validation
- Proper reconcilation
Standard Plan
inclusive of GST
- TDS return filing for two quarter.
- Import from any accounting software or excel.
- Manual data limited up to four deductions only.
- TDS certificate generation
- Traces validation
- Proper reconcilation
Premium Plan
inclusive of GST
- TDS return filing for four quarter.
- Import from any accounting software or excel.
- Manual data limited up to four deductions only.
- TDS certificate generation
- Traces validation
- Proper reconcilation
FAQ's on TDS Return Filing
Your Questions Answered
What is TDS (Tax Deducted at Source)?
TDS is a mechanism where a person (the deductor) making a payment specified under the Income Tax Act is required to deduct tax at source and remit it to the government. The purpose is to collect tax at the source of income generation.
Who is a Deductor and a Deductee?
The Deductor is the person or entity responsible for deducting the tax (e.g., an employer paying salary). The Deductee is the person receiving the payment from which the tax has been deducted (e.g., the employee).
What are the key TDS forms used for filing returns?
The primary forms are Form 24Q (for salary payments), Form 26Q (for payments other than salary made to residents), and Form 27Q (for payments made to non-residents).
What is the significance of the Deductor having a TAN?
The Tax Deduction and Collection Account Number (TAN) is mandatory for anyone required to deduct or collect tax at source. It is required on all TDS/TCS payment challans and returns.
How does the Deductee claim credit for the TDS deducted?
The Deductee can verify the TDS deducted on their behalf in their Form 26AS or Annual Information Statement (AIS). They claim this amount as a tax credit against their total income tax liability when filing their Income Tax Return (ITR).
What happens if TDS is deducted but not deposited?
If TDS is deducted by the deductor but not deposited with the government, the deductor is liable to pay interest and penalties. The deductee may face difficulty claiming the credit unless the amount is reflected in Form 26AS/AIS.
What is the TDS rate if the deductee does not provide a PAN?
If a deductee does not provide their Permanent Account Number (PAN), the deductor is required to deduct tax at the higher of the following two rates: the prescribed rate, or 20%. This is a measure to enforce PAN compliance.
What is Form 16/16A?
Form 16 is the TDS certificate issued by an employer to an employee for tax deducted on salary. Form 16A is the TDS certificate issued for tax deducted on non-salary payments (like professional fees or interest).
Essential Documents for TDS Return Filing
Key documents include TDS challans, PAN of deductees, and details of payments/deductions. Accurate preparation ensures smooth, error-free filing and compliance.
Tax Deducted at Source (TDS)
TDS is the process of collecting income tax directly at the source of payment. It ensures advance tax collection, minimizes evasion, and simplifies compliance for the taxpayer.
