Who must deduct TDS
Tax Deducted at Source applies to companies, firms, LLPs, trusts and to individuals and HUFs whose business or profession is liable to tax audit for the previous year. It also applies to everyone paying salary above the taxable limit. Some provisions, such as TDS on rent above Rs 50,000 a month and on purchase of immovable property, apply even to individuals not in business.
For businesses in Gurugram, the most common TDS work involves salary, contractors, professionals, rent for offices and warehouses, commission to agents and large purchases of goods.
TAN and the yearly cycle
- Apply for TAN online before the first deduction. It is quoted on every challan, statement and certificate.
- Deduct at the time of credit or payment, whichever is earlier, at the right rate.
- Deposit by the 7th of the next month, or by 30 April for March.
- File quarterly statements on time.
- Issue certificates: Form 16 for salary once a year, Form 16A for other payments every quarter, downloaded from TRACES.
Common sections, rates and thresholds
The table below shows the position for payments to residents from 1 April 2025, as continued for tax year 2026-27. Under the Income-tax Act, 2025, these items have been moved into Section 393, but the rates and thresholds in the table remain the same; the old section numbers are shown because most people still know them.
| Payment | Old section | Threshold | Rate |
|---|---|---|---|
| Salary | 192 | Income above the basic exemption after deductions | Average rate of tax on estimated salary |
| Contractor or sub-contractor | 194C | Rs 30,000 single payment or Rs 1 lakh in the year | 1% for individual or HUF payee; 2% for others |
| Professional fees | 194J | Rs 50,000 in the year | 10% |
| Fees for technical services, royalty for films, call centres | 194J | Rs 50,000 in the year | 2% |
| Director’s fees and remuneration (not salary) | 194J | No threshold | 10% |
| Rent of land, building or furniture | 194-I | Rs 50,000 for a month or part of a month | 10% |
| Rent of plant, machinery or equipment | 194-I | Rs 50,000 for a month or part of a month | 2% |
| Rent paid by individuals or HUFs not liable to deduct under 194-I | 194-IB | Rs 50,000 a month | 2% |
| Commission or brokerage | 194H | Rs 20,000 in the year | 2% |
| Purchase of goods, where buyer’s turnover exceeded Rs 10 crore in the preceding year | 194Q | Purchases from one seller above Rs 50 lakh in the year | 0.1% on the amount above Rs 50 lakh |
| Salary, interest, commission or bonus to partners | 194T | Rs 20,000 in the year | 10% |
| Interest other than on securities (non-bank payer) | 194A | Rs 10,000 in the year | 10% |
Where the payee does not provide a valid PAN, tax is generally deducted at 20% or the normal rate, whichever is higher. Specific exclusions apply in many of these sections, for example transporters owning ten or fewer goods carriages who give a declaration with PAN under 194C.
Entry-by-entry checking
We do not apply TDS at the level of an expense head. Each entry in the ledger is tested on its own: who the payee is, what the payment is for, which section applies, whether the threshold is crossed, and whether GST is to be excluded from the base. This is how short deductions, which lead to interest and disallowance, are caught in time.
Quarterly returns and due dates
| Quarter | TDS statement due date | TCS statement due date |
|---|---|---|
| April to June | 31 July | 15 July |
| July to September | 31 October | 15 October |
| October to December | 31 January | 15 January |
| January to March | 31 May | 15 May |
| Statement | Up to quarter ending March 2026 (1961 Act) | From 1 April 2026 (2025 Act) |
|---|---|---|
| Salary | Form 24Q | Form 138 |
| Other payments to residents | Form 26Q | Form 140 |
| Payments to non-residents | Form 27Q | Form 144 |
| Tax collected at source | Form 27EQ | Form 143 |
| Salary certificate | Form 16 | Form 130 |
| Non-salary certificate | Form 16A | Form 131 |
Statements for quarters up to March 2026, and corrections to them, continue in the old forms.
Late fee, interest and other consequences
| Default | Consequence |
|---|---|
| Statement filed late | Late fee of Rs 200 per day, up to the TDS amount (Section 234E of the 1961 Act; carried into the new Act) |
| Statement not filed or incorrect | Penalty of Rs 10,000 to Rs 1 lakh may be levied; no penalty for late filing if tax, fee and interest are paid and the statement is filed within one month of the due date |
| Tax not deducted | Interest at 1% per month or part of a month from the date it should have been deducted |
| Tax deducted but not deposited | Interest at 1.5% per month or part of a month from the date of deduction |
| Not deducted or not deposited | 30% of the expense disallowed for residents, and the full expense for payments to non-residents, until the default is corrected |
Interest and late fee are calculated by TRACES when the statement is processed, and any short payment shows up as a default notice. We check the TRACES justification report and clear the demand through a correction.
Corrections, lower deduction certificates and TRACES
- Correction statements. Wrong PAN, wrong challan mapping, missing deductees and wrong section codes are fixed through a correction filed online. Under the new Act, corrections must be filed within two years from the end of the tax year in which the statement was due, so errors should be fixed promptly.
- Lower or nil deduction certificates. A payee whose actual tax is lower than the TDS can apply for a certificate. We prepare the application and estimated income working for vendors and for your own business where you are the payee.
- TRACES work. Downloading Form 16 and 16A, justification reports and consolidated files, and replying to default intimations.
206AB and 206CCA: current position
Sections 206AB and 206CCA, which required higher TDS and TCS for persons who had not filed returns, were omitted from 1 April 2025. You no longer need to check the compliance status of each payee for this purpose. Checking PAN validity and Aadhaar linking is still important, because an inoperative PAN can still attract a higher rate.
How KSV manages your TDS
- Monthly review. Your ledgers in Tally or Busy are reviewed entry by entry before the 7th.
- Challans. We prepare the challan and share it for payment, or pay through your authorised user.
- Quarterly statements. Filed with PAN validation and challan matching.
- Certificates. Form 16 and 16A issued to employees and vendors.
- Year-end tie-up. TDS ledgers reconciled with Form 26AS and the tax audit report, so the figures in your own income tax return hold up.
We work with businesses across Gurugram, Manesar and Delhi NCR. Fees start from Rs 1,499 and depend on the number of deductees and entries; see our pricing page or contact us with the number of deductees and payments each month. If a TDS default notice has already arrived, see our income tax notice reply service.
Frequently asked questions
Who needs a TAN?
Every person who is required to deduct or collect tax at source needs a Tax Deduction and Collection Account Number (TAN). This includes companies, firms, LLPs and individuals or HUFs who are required to deduct tax, for example because their business turnover crossed the audit limit. Individuals paying rent above the limit under the special rent provision can use their PAN instead.
When must TDS be deposited?
Tax deducted in a month must generally be deposited by the 7th of the following month. For tax deducted in March, the due date is 30 April. Government offices paying without a challan deposit on the same day.
What are the due dates for quarterly TDS returns?
31 July for April to June, 31 October for July to September, 31 January for October to December, and 31 May for January to March. These dates apply to salary, non-salary and non-resident statements, and the TCS statement is due by the 15th of the month after each quarter.
What is the late fee for filing a TDS return late?
A late fee of Rs 200 per day applies until the statement is filed, subject to a maximum of the TDS amount. A separate penalty can also be imposed where the statement is not filed within the extended time or contains incorrect information. The late fee must be paid before the statement is accepted.
Do Forms 24Q and 26Q still exist?
For quarters up to January to March 2026, the old forms 24Q, 26Q, 27Q and 27EQ apply, including for corrections. For tax deducted from 1 April 2026 under the Income-tax Act, 2025, the new forms are Form 138 for salary, Form 140 for other residents, Form 144 for non-residents and Form 143 for TCS.
Is higher TDS still deducted for non-filers under Section 206AB?
No. Sections 206AB and 206CCA were omitted with effect from 1 April 2025. Higher deduction still applies where the payee does not furnish a valid PAN, or where PAN is inoperative because it is not linked to Aadhaar.
My vendor wants lower TDS. How does that work?
The vendor applies to the Assessing Officer for a lower or nil deduction certificate. Under the 1961 Act this was Form 13 under Section 197; for the new Act it is Form 128. Once the certificate is issued and shows your TAN, you deduct at the rate and up to the amount stated in it.
TDS kata lekin jama nahi kiya, ab kya hoga?
Deposit it immediately. Interest at 1.5% per month or part of a month runs from the date of deduction to the date of payment, and must be paid before filing the statement. Delay can also attract prosecution in serious cases, so it should not be left pending.
Why does my payee not see TDS in Form 26AS?
Usually because the quarterly statement was not filed, the PAN was wrong, or the challan was not matched correctly. We check the TRACES status, fix the error through a correction statement and confirm when the credit appears.