Tax Deducted at Source (TDS) is one of India's primary tax collection mechanisms — and one of the most penalty-prone compliance areas for businesses. If you pay salaries, vendor bills, rent, professional fees, or interest, you are likely required to deduct TDS and deposit it with the government. Missing this obligation carries a 1.5% per month interest charge plus penalties up to 100% of TDS amount.
Key TDS Rates for Businesses (2026)
| Payment Type | Section | Rate | Threshold |
|---|---|---|---|
| Salary | 192 | As per slab | Above basic exemption |
| Professional/Technical fees | 194J | 10% | ₹30,000/year |
| Rent (land/building) | 194I | 10% | ₹2,40,000/year |
| Contractor payments | 194C | 1% (ind.) / 2% (co.) | ₹30,000/single or ₹1L/year |
| Interest (bank FD etc.) | 194A | 10% | ₹40,000/year |
| Commission/brokerage | 194H | 5% | ₹15,000/year |
| Property purchase | 194IA | 1% | ₹50 lakh+ |
| E-commerce payments to sellers | 194O | 1% | ₹5 lakh/year |
TDS Payment and Return Deadlines
| Activity | Deadline |
|---|---|
| TDS deducted in April–February | Deposit by 7th of the next month |
| TDS deducted in March | Deposit by 30th April |
| Quarterly TDS Return (24Q/26Q/27Q) | 31st July, 31st Oct, 31st Jan, 31st May |
| TDS Certificate (Form 16/16A) | 15 days after return filing |
⚠ Late deposit penalty: 1.5% per month interest from date of deduction to date of deposit. Non-deduction: 1% per month from due date of deduction.
Common TDS Mistakes Businesses Make
- Not deducting on part payments: TDS is applicable on every payment once the annual threshold is crossed — you must also deduct on earlier payments retroactively
- Wrong PAN of deductee: If PAN is wrong or not provided, TDS rate jumps to 20%
- Not issuing Form 16A: Vendors need this certificate to claim TDS credit in their ITR — failing to issue it damages relationships and is a default
- Ignoring TDS on GST component: TDS is deducted on the base amount excluding GST (don't deduct TDS on the GST portion)
What to Do When You Receive a TDS Default Notice
The TRACES portal (tdscpc.gov.in) automatically generates defaults when TDS returns are filed late, deductions are short, or PAN details are wrong. On receiving a default notice:
- Login to TRACES and check the Justification Report for specific defaults
- Pay any outstanding TDS + interest through Challan 281
- File a correction statement (revised TDS return) to fix errors
- Respond to the demand on the IT portal
TDS Compliance Checklist
- TAN (Tax Account Number) obtained
- TDS deducted at correct rates from all qualifying payments
- TDS deposited by 7th of following month (30th April for March)
- Quarterly TDS returns filed on time (26Q/24Q)
- Form 16/16A issued to deductees within 15 days
- TRACES account monitored for defaults
Let Us Handle Your TDS Compliance
Monthly TDS computation, deposit, quarterly return filing, and Form 16 generation — all done for you.
Get TDS Support