TDS Filing in India – Complete Guide

1. What is TDS?

TDS (Tax Deducted at Source) is a system where the payer deducts tax at the time of making specified payments (salary, rent, professional fees, interest, etc.) and deposits it with the Government on behalf of the payee.

Purpose:

• Ensure timely collection of taxes

• Reduce tax evasion

• Provide credit to payees for tax already paid

2. Legal Basis

• Income Tax Act, 1961 – Sections 192 to 206

• TDS Rules 1962 – Details deduction, deposit, and filing process

• Applicable Forms – Form 26Q, 27Q, 24Q, 26QB, depending on the type of payment

3. Who is Responsible for TDS?

1. Deductor (Payer)

   • Responsible for deducting TDS before making payment

   • Depositing TDS with the Government

2. Deductee (Recipient)

   • Receives payment after TDS deduction

   • Can claim TDS credit in Form 26AS or IT return

3. Authorised Signatory

   • Person authorized to file TDS returns online

Advisory: Deductor can be company, partnership firm, LLP, trust, or individual (if required under TDS rules).

4. Payments Subject to TDS

Advisory: Rates are subject to changes in Finance Act annually.

5. Why TDS is Deducted

1. Ensures timely tax collection

2. Reduces tax evasion risk

3. Helps deductee avoid large lump sum tax payments

4. Enables Government tracking of income and payments

5. Provides credit in Form 26AS for deductee

6. TDS Deduction Process – Step by Step

Step 1: Identify Applicability

• Determine if payment type is subject to TDS

• Check deductee category (individual, company, non-resident, etc.)

• Confirm threshold limits (payments below threshold not deductible)

Step 2: Deduct TDS at Source

• Calculate TDS amount using applicable rate

• Deduct before making payment to deductee

• Maintain record of payment, TDS, and deductee details

Step 3: Deposit TDS to Government

• Deposit TDS using Challan ITNS 281 (online or offline)

• For non-salary payments, use Form 26Q or 27Q

• Payment must be made within prescribed due date (see deadlines below)

Step 4: Issue TDS Certificate

• After deposit, issue TDS certificate to deductee:

  • Form 16 – Salary TDS

  • Form 16A – Non-salary TDS

• Certificate contains deducted amount, PAN, and challan details

Step 5: File TDS Return

• Deductor files quarterly TDS return online with the Income Tax Department

• Forms based on type of TDS:

  • Form 24Q – Salary

  • Form 26Q – Non-salary payments (domestic)

  • Form 27Q – Payments to non-residents

  • Form 27EQ – TDS on e-payment / auction of lottery tickets

• Return contains deductee details, PAN, TDS deposited, and challan info

7. Due Dates for TDS Filing & Payment

Advisory: Salary TDS deduction and deposit must be monthly, while filing is quarterly.

8. Documents Required for TDS Filing

• Deductee PAN & details

• Invoice / payment advice

• Payment records / bank statements

• Challan ITNS 281 / proof of deposit

• Form 16 / Form 16A preparation

• Previous quarter’s TDS return (for reconciliation)

9. Consequences of Non-Compliance

10. Benefits of TDS Filing

• Ensures tax compliance & avoids interest / penalties

• Provides deductee credit in Form 26AS

• Helps maintain proper accounting of payments & taxes

• Reduces tax liability risk at year-end

• Improves transparency with employees / vendors / contractors

11. Advisory Notes – TDS Compliance

1. Identify all payments subject to TDS

2. Maintain deductee PAN and details accurately

3. Deduct TDS before making payment

4. Deposit TDS before due date using ITNS 281

5. File quarterly TDS returns online with correct details

6. Issue TDS certificates (Form 16 / 16A) timely

7. Reconcile Form 26AS with your records quarterly

8. Keep TDS records for at least 6 years as per IT Act

9. Implement internal controls to avoid late deductions / deposits

12. Advanced / Additional Information

1. TDS on Non-Resident Payments

   • Section 195 – TDS on royalty, fees for technical services, interest, rent

   • Check DTAA provisions to avoid double taxation

2. TDS on Rent

   • 194-I – Residential / Commercial / Land rent

   • Deductor responsible even if deductee fails to submit PAN

3. Form 26AS Reconciliation

   • Deductee should reconcile TDS credits to avoid mismatch while filing IT return

4. TDS on Contractors / Professionals

   • Section 194C / 194J – Deduct before payment

   • Maintain proper contract agreement & invoices

5. TDS Corrections

   • Mistakes can be rectified via TDS correction statements in next quarter

   • Important to correct PAN errors, challan mistakes, or wrong deduction rates

6. Penalty & Prosecution

   • Extreme non-compliance can attract prosecution under Income Tax Act

   • Maintaining accurate TDS compliance avoids legal risk and scrutiny