Tax Deducted at Source (TDS) is one of the most significant compliance obligations for Indian employers and businesses. Non-deduction, short deduction, late deposit, or incorrect filing of TDS returns can attract interest, penalties, and prosecution under the Income Tax Act. This guide covers everything your business needs to know about TDS compliance for FY 2024-25.
Key TDS Sections and Rates
TDS applies to a wide range of payments. Here are the most commonly applicable sections for businesses:
- Section 192: Salary payments — TDS at applicable income tax slab rates.
- Section 194A: Interest (other than securities) — 10% for amounts exceeding ₹40,000/year (₹50,000 for senior citizens).
- Section 194C: Payments to contractors — 1% (individuals/HUF) or 2% (others) for payments exceeding ₹30,000 per transaction or ₹1 lakh per year.
- Section 194H: Commission or brokerage — 5% for amounts exceeding ₹15,000/year.
- Section 194I: Rent — 10% for land/building/furniture; 2% for plant and machinery, for amounts exceeding ₹2.4 lakhs/year.
- Section 194J: Professional / technical services — 10% (professional services) or 2% (technical services, call centres) for amounts exceeding ₹30,000/year.
- Section 194Q: Purchase of goods — 0.1% on purchase value exceeding ₹50 lakhs/year (for buyers with turnover over ₹10 crores).
TDS Deposit Deadlines
TDS deducted must be deposited with the government within prescribed timelines:
- For April to February: By the 7th of the following month.
- For March: By 30th April.
- Government deductors: Same day as TDS deduction (if paid by book entry), else by 7th of the following month.
Late deposit attracts interest at 1.5% per month (or part of month) from the date of deduction to the date of deposit.
Quarterly TDS Return Filing Deadlines
- Q1 (Apr–Jun): 31st July
- Q2 (Jul–Sep): 31st October
- Q3 (Oct–Dec): 31st January
- Q4 (Jan–Mar): 31st May
Form 24Q is for salary TDS, Form 26Q for non-salary TDS to residents, and Form 27Q for payments to non-residents.
Common TDS Compliance Mistakes
- Not deducting TDS on payments to freelancers and contractors exceeding threshold limits.
- Using wrong PAN of deductee — results in TDS credit not reflecting in Form 26AS of the payee.
- Late filing of quarterly TDS returns — attracts ₹200/day penalty under Section 234E.
- Not issuing Form 16A within 15 days of the due date of TDS return — attracts ₹100/day penalty.
- Failure to deduct TDS on rent paid to landlord exceeding ₹2.4 lakhs/year under Section 194IB (applicable to individuals/HUFs).