TDS Compliance for Businesses in India: Rates, Filing Deadlines, and Common Mistakes
By GSRC and Associates, Chartered Accountants
Tax Deducted at Source (TDS) is one of the most common compliance requirements for businesses in India. If your business makes payments above specified thresholds for salaries, rent, professional fees, or contractor payments, you are required by law to deduct TDS and deposit it with the government.
TDS must be deducted at the time of payment or credit (whichever is earlier) and deposited to the government by the 7th of the following month (by April 30 for March). Quarterly returns — 24Q (salary) and 26Q (others) — must be filed within 31 days of quarter-end. Failure attracts interest at 1–1.5% per month plus penalties.
Key TDS Sections and Rates for Businesses
Section 192 — Salary
TDS on salary is deducted at the applicable income tax slab rate of the employee. No fixed rate — depends on estimated annual salary and tax liability. Must be deposited monthly.
Section 194C — Contractor Payments
- Individual/HUF contractors: 1%
- Others (companies, firms): 2%
- Threshold: Single payment over ₹30,000 or aggregate over ₹1 lakh in a year
Section 194J — Professional and Technical Services
- Professional fees (doctors, lawyers, CAs, architects, consultants): 10%
- Technical services, royalty, non-compete fees: 2%
- Threshold: ₹30,000 per financial year
Section 194I — Rent
- Rent of plant, machinery, equipment: 2%
- Rent of land, building, furniture: 10%
- Threshold: ₹2.4 lakh per financial year (₹20,000 per month)
Section 194A — Interest (Non-Banks)
- Interest paid by non-banking entities: 10%
- Threshold: ₹5,000 per year (₹40,000 for bank/post office FDs for non-senior citizens)
Section 194Q — Purchase of Goods
- TDS on purchase of goods from a resident seller: 0.1%
- Applicable if buyer's turnover exceeds ₹10 crore and payment to a single seller exceeds ₹50 lakh in a year
TDS Deposit Deadlines
- Government deductors: Same day as deduction
- Non-government deductors (most businesses): By the 7th of the following month
- March deductions: By April 30 (extended deadline)
- Pay via Challan 281 on the Income Tax portal or NSDL
TDS Return Filing Deadlines
- Q1 (April–June): 31 July
- Q2 (July–September): 31 October
- Q3 (October–December): 31 January
- Q4 (January–March): 31 May
Form 24Q for salary TDS; Form 26Q for all non-salary TDS.
Consequences of TDS Non-Compliance
- Interest for late deposit: 1% per month (from date of deduction to date of deposit); 1.5% per month (if deducted but deposited late)
- Penalty for late return filing: ₹200 per day under Section 234E (subject to maximum of TDS amount)
- Penalty for non-filing or incorrect filing: ₹10,000–₹1 lakh under Section 271H
- Disallowance of expense: 30% of the payment on which TDS was not deducted is disallowed as a business expense in your income tax return
TDS Certificate — Form 16 and 16A
- Form 16: TDS certificate for salary payments — issued by June 15 after year-end
- Form 16A: TDS certificate for non-salary payments — issued within 15 days of filing the quarterly return
Failing to issue TDS certificates on time attracts a penalty of ₹100 per day per certificate.
Lower Deduction or Nil TDS — Section 197
If a vendor or employee expects their tax liability to be nil or lower than the standard rate, they can apply to the Assessing Officer for a certificate under Section 197. You must deduct at the rate specified in this certificate, not the standard rate.
TDS on Property Purchase — Section 194IA
If you purchase immovable property worth ₹50 lakh or more, you must deduct 1% TDS from the payment and deposit it via Form 26QB. The seller's Form 16B must be issued within 15 days.
GSRC and Associates manages complete TDS compliance for businesses in Ghaziabad — monthly deposit, quarterly returns, Form 16/16A issuance, and handling demand notices from the Income Tax Department.
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