Compliance
TDS compliance essentials for businesses
Understand TDS obligations, rates, and common mistakes that lead to penalties.
On this page
Tax Deducted at Source (TDS) is a mechanism where tax is collected at the point of income generation. As a business, you become a collection agent for the government.
Who Must Deduct TDS?
Companies (mandatory), Partnership firms and LLPs (if subject to tax audit in previous year), Individuals/HUFs (if turnover exceeds ₹1 crore in business or ₹50 lakh in profession in previous year), and Government bodies.
Common TDS Sections for Businesses
| Section | Nature of Payment | Rate |
|---|---|---|
| 192 | Salaries | As per slab |
| 194A | Interest (other than bank) | 10% |
| 194C | Contractor payments | 1% (individual/HUF), 2% (others) |
| 194H | Commission/brokerage | 5% |
| 194I | Rent | 2% (equipment), 10% (land/building) |
| 194J | Professional/technical fees | 10% |
| 194Q | Purchase of goods (more than ₹50L) | 0.1% |
Rates are subject to change. Surcharge and cess apply for certain payments.
TDS Compliance Calendar
| Action | Due Date |
|---|---|
| TDS deposit | 7th of following month |
| TDS return filing | Quarterly (31st of month following quarter) |
| TDS certificates (Form 16/16A) | Within 15 days of TDS return due date |
Common Mistakes and Penalties
Non-deduction attracts interest at 1% per month from date deductible to date of deduction. Late deposit attracts interest at 1.5% per month from date of deduction to date of deposit. Late return filing incurs ₹200 per day (maximum: TDS amount). Non-filing may result in penalty up to TDS amount plus prosecution possible.
Practical Tips
Obtain PAN from all payees before payment. Verify PAN validity on income tax portal. Maintain proper documentation for lower/nil TDS claims. Reconcile TDS deducted with Form 26AS. File corrections promptly if errors found.
Lower TDS Certificates
Vendors expecting refunds can apply for lower TDS certificates (Section 197). As a deductor, verify certificate authenticity, apply lower rate only for the specified amount, and keep certificates on file for audit.
This information is for educational purposes only and does not constitute professional advice. TDS rules are complex; consult a professional for specific situations.
If compliance is becoming reactive, connect this with our ROC Compliance, Income Tax Filing, and the due-date support inside the Tax Calendar.
This material is general information. Apply it to your business only after checking the relevant facts, source documents and requirements.