Who is required to deduct TDS?
Under Chapter XVII-B of the Income Tax Act 1961, any person making specified payments is required to deduct tax at source before making the payment. The obligation applies to businesses of all sizes — there is no turnover threshold for most payment categories.
The most common TDS categories are:
- Section 192: TDS on salary — mandatory for all employers paying salary above the basic exemption limit
- Section 194C: TDS on payments to contractors (1% for individuals/HUF, 2% for others) — above ₹30,000 per payment or ₹1 lakh per year
- Section 194H: TDS on brokerage and commission — 5% above ₹15,000 per year
- Section 194I: TDS on rent — 10% for land/building (above ₹2.4 lakh per year), 2% for plant/machinery
- Section 194J: TDS on professional and technical services — 10% for professional fees, 2% for technical services, above ₹30,000 per year
If you pay salary, rent, or professional fees — and most businesses do — TDS applies to you.
What we handle each quarter
- TDS computation and deduction tracking
We maintain a monthly deduction register covering all TDS-applicable payments — salary (Section 192), contractor payments (194C), rent (194I), professional fees (194J), and others. We flag new vendors who cross the threshold mid-year.
- TDS payment challan (ITNS 281) — monthly
TDS deducted must be deposited to the government by the 7th of the following month (April 30 for March deductions). We prepare and share the ITNS 281 challan for each month, ensuring the correct section code, nature of payment, and assessment year.
- Quarterly TDS returns (24Q / 26Q / 27Q)
24Q: Salary TDS (quarterly). 26Q: Non-salary domestic TDS. 27Q: TDS on payments to non-residents under Section 195. We prepare and file all applicable forms via TRACES.
- Form 16 and Form 16A generation and delivery
Form 16 (salary TDS certificate, due June 15) and Form 16A (non-salary TDS certificate, due 15 days after each quarterly return) are generated from TRACES, digitally signed, and distributed to employees and vendors. Missing Form 16 is the most common employee grievance during ITR season.
- TRACES reconciliation and default notice handling
We reconcile your 26AS against the TDS return to confirm accurate CIN matching and prevent Short Deduction / Short Payment demands. If a TRACES intimation arrives, we respond and rectify within the notice response window.
- Lower Deduction Certificate support (Form 13)
If a vendor or employee applies for a lower or nil deduction certificate under Section 197, we verify the certificate, update the deduction register, and maintain documentary evidence — protecting you from assessing officer queries.
The monthly and quarterly TDS cycle
During the month
Deduction tracking
Each time you make a TDS-applicable payment, we update the deduction register. For salary, we maintain a monthly TDS computation that adjusts for investment declarations through the year.
By the 7th
TDS challan payment
We prepare the ITNS 281 challan with correct section codes and share it for payment. You pay through your bank's NEFT/RTGS or net banking. We confirm receipt and record the BSR code and challan number.
Quarter-end
Return preparation (24Q/26Q)
We compile the quarter's deductions, match each payment to its challan, and prepare the quarterly return file. We review for PAN errors (which trigger TRACES demands) before filing.
By due date
Returns filed, certificates issued
Returns filed via TRACES. Form 16A certificates generated within 15 days of the return due date. Form 16 for salary generated and distributed before June 15. You receive a quarterly TDS summary.
What TDS compliance costs
TDS Compliance (Salary + Non-salary)
from ₹1,999
per quarter
- Monthly deduction register maintenance
- ITNS 281 challan preparation
- 24Q and 26Q quarterly returns
- Form 16 and Form 16A generation
- TRACES reconciliation
Add-on: NRI TDS (27Q) — from ₹999/quarter additional
Add-on: TDS default notice response — ₹999 per notice
Pricing covers up to 10 employees and 20 vendor deductions. High-volume payroll (50+ employees) is quoted separately.
What clients ask about TDS
What is the penalty for not deducting TDS?
Under Section 271C, failure to deduct TDS attracts a penalty equal to the amount of TDS not deducted. This is separate from the interest liability under Section 201(1A) — 1% per month from the date the tax was deductible to the date it was actually deducted, and 1.5% per month from the date it was deducted to the date of deposit. On a ₹5 lakh professional fee payment with TDS of ₹50,000 (10%), non-deduction could mean ₹50,000 in penalty plus interest compounding monthly.
What is a TDS default notice from TRACES and how do I respond?
TRACES generates automatic intimations when it detects a mismatch between the TDS amount deducted in your return and the amount deposited via challan, or when it finds PAN errors. The most common defaults are: Short Deduction, Short Payment, and Late Filing. Each intimation must be responded to within 30 days — either by agreeing and paying the demand or by filing a correction statement. Ignored defaults escalate to demands under Section 201.
Do I need to deduct TDS on rent if I am an individual?
Section 194IB requires individuals and HUFs (other than those subject to audit under Section 44AB) to deduct TDS at 5% on rent payments exceeding ₹50,000 per month. The deducted amount is deposited via Form 26QC within 30 days of the end of the month in which rent was deducted. This is a common area of non-compliance — individual tenants paying commercial rent often overlook this obligation.
What is a Lower Deduction Certificate and when should I ask for one?
Under Section 197, a taxpayer who expects their total tax liability to be lower than the TDS rate can apply for a certificate authorising the deductor to deduct TDS at a lower rate or nil. The certificate is issued by the assessing officer and is valid for the financial year specified. Common applicants: companies with large tax losses, NRIs with DTAA benefits, and individuals with significant advance tax already paid.
Can TDS returns be revised after filing?
Yes. Correction statements can be filed on TRACES for errors in TDS returns — incorrect PAN, wrong challan details, omitted deductees, or wrong section codes. PAN errors are the most consequential: if a deductee's PAN is wrong, the TDS credit does not appear in their Form 26AS, and they cannot claim it while filing their ITR. We recommend a pre-filing PAN validation check for all new vendors.
Received a TRACES demand for ₹1.2 lakh — claimed we had a short payment across three quarters. Turned out our previous CA had been entering incorrect challan BSR codes. Auranity filed correction statements, cleared the demand within 10 days, and set up a verification step that prevents the same error.
We were deducting TDS on professional fees at 10% for all vendors — including technical service providers who should be at 2% under Section 194J(b). Auranity's review identified the overcorrection and helped three vendors claim refunds. Small thing, but it built a lot of trust with those vendors.