by Here’s the revised and more comprehensive write-up, including TDS applicability for your business:
🔹 What is TDS?
Tax Deducted at Source (TDS) is a system where your company deducts tax while making certain payments and deposits it with the government. This ensures tax is collected at the point of transaction, minimizing tax evasion.
🔹 Applicability of TDS Deduction
you must deduct TDS if:
✅ You make payments above the prescribed threshold limits (as per the Income Tax Act).
✅ The payment type falls under TDS provisions (e.g., salary, rent, contractor payments, professional fees, etc.).
✅ The recipient is an Indian resident (for non-residents, different TDS provisions under Section 195 apply).
✅ Your company has a valid TAN (Tax Deduction and Collection Account Number).
🚨 TDS is not applicable if:
❌ Payments are below threshold limits.
❌ The payee provides Form 15G/15H (for individuals) or a Lower Deduction Certificate under Section 197.
❌ Not applicable for an Individual Business (Proprietorship) | HUF if they are not covered in Tax Audit.
❌ Certain exemptions apply (e.g., payments to government entities).
🔹 When Should Your Entity Deduct TDS?
TDS should be deducted at the time of payment or credit to the recipient’s account, whichever is earlier.
For example, if you book an expense (say, professional fees) in March but pay in April, TDS must be deducted in March itself.
🔹 Major TDS Sections & Rates Applicable
| Nature of Payment | TDS Section | Threshold Limit | TDS Rate |
|---|---|---|---|
| Salary | 192 | As per slab | As per IT slab |
| Payment to Contractors | 194C | ₹30,000 (Single bill) / ₹1,00,000 (Annual) | 1% (Individuals) / 2% (Companies) |
| Rent (Land/Building/Furniture) | 194I | ₹2,40,000 per year [₹6,00,000 per year (From FY 25-26)] | 10% |
| Rent (Machinery/Plant/Equipment) | 194I | ₹2,40,000 per year | 2% |
| Professional/Technical Fees | 194J | ₹30,000 per year (₹50,000 per year from FY 25-26) | 10% (General) / 2% (Technical Services) |
| Interest (other than banks) | 194A | ₹5,000 (₹40,000 for banks) {₹10,000 (₹50,000 for banks) from FY 25-26} | 10% |
| Commission/Brokerage | 194H | ₹15,000 per year (₹20,000 per year from FY 25-26) | 5% |
Note: No TDS is deducted if the payee provides a valid Lower Deduction Certificate under Section 197 or submits Form 15G/15H (for individuals only).
🔹 TDS Payment & Filing Deadlines
📍 TDS Deposit Due Dates
✅ For payments made in any month: Deposit TDS by the 7th of the following month
✅ For payments made in March: Deposit by 30th April
📍 TDS Return Filing Due Dates
Your company must file quarterly TDS returns:
| Quarter | Period Covered | Due Date |
|---|---|---|
| Q1 | April – June | 31st July |
| Q2 | July – September | 31st October |
| Q3 | October – December | 31st January |
| Q4 | January – March | 31st May |
Important: After filing returns, deductees can download Form 16 (for salary) or Form 16A (for other payments) as proof of TDS deduction.
🔹 What Happens If You Don’t Deduct or Pay TDS on Time?
🚨 Interest & Penalties
- Late Deduction of TDS: 1% per month
- Late Deposit of TDS: 1.5% per month
- Late Filing of TDS Return: ₹200 per day (max up to TDS amount)
🚨 Disallowance of Expenses
If TDS is not deducted, the entire expense may be disallowed while calculating taxable income, leading to higher tax liability for your company.
🚨 Prosecution
In severe cases, non-compliance may lead to penalties or legal action under the Income Tax Act.
🔹 Key Takeaways
✅ Check if TDS is applicable before making payments.
✅ Deduct TDS at the correct rate and deposit it on time.
✅ File TDS returns every quarter to stay compliant.
✅ Issue Form 16/16A so that deductees can claim TDS credit.
For any assistance, feel free to consult your tax advisor or visit out contact us page.
“Small steps in the right direction can turn out to be the biggest step of your life.”
