Step-by-Step Guide
8 Steps
How to File TDS Returns in India (Step by Step Guide)
Complete guide on how to file TDS returns in India. Covers Form 24Q, 26Q, 27Q, 27EQ, TDS due dates, challan payment, TDS rate chart, and TRACES portal login for 2026.
Quick Overview
Estimated Cost
₹3000
Time Required
3 to 7 Days
Total Steps
8 Steps
What You'll Need
Documents Required
- TAN (Tax Deduction and Collection Account Number) of the deductor
- PAN cards of all deductees (employees, vendors, contractors, professionals)
- Details of all TDS deductions made during the quarter including deductee PAN, amount paid, TDS deducted, and section under which TDS was deducted
- TDS challan payment receipts (Challan 281) for all deposits made during the quarter
- BSR code, challan serial number, and date of deposit for each challan
- Salary details including gross salary, exemptions, deductions, and tax computation for Form 24Q
- Bank account details of the deductor for challan verification
- Previous quarter TDS return acknowledgement numbers (if applicable)
- Digital Signature Certificate (DSC) or Electronic Verification Code (EVC) for e-filing
Tools & Prerequisites
- RPU (Return Preparation Utility) software provided free by NSDL/Protean for preparing TDS returns
- FVU (File Validation Utility) for validating the return file before upload
- Active account on the TRACES portal (tdscpc.gov.in) for TDS certificate downloads and corrections
- Active account on the Income Tax e-filing portal (incometax.gov.in) for TDS return filing
- Internet banking or OLTAS portal for TDS challan payments
Tax Deducted at Source (TDS) is one of the most important compliance obligations for businesses in India. Every company, LLP, partnership firm, and even certain individuals are required to deduct TDS from specified payments such as salary, rent, contractor fees, professional charges, interest, and commission, and remit the deducted amount to the government.
Filing TDS returns is a quarterly obligation that involves reporting all deductions made during the quarter, along with challan details and deductee information. This guide covers the complete TDS return filing process for FY 2025-26, including applicable TDS rates, due dates, software tools, and common mistakes to avoid.
Understanding the TDS Mechanism
TDS works as a pay-as-you-earn tax collection system. Instead of the income earner paying the full tax at the end of the year, the payer deducts a portion of the tax at the time of payment and deposits it directly with the government. The key parties involved are:
- Deductor: The person or entity making the payment and responsible for deducting TDS (employer, client, tenant, etc.)
- Deductee: The person receiving the payment from which TDS is deducted (employee, contractor, landlord, consultant, etc.)
- Government: The ultimate recipient of the TDS amount through the banking system
The deductee gets credit for the TDS when filing their income tax return. If the TDS exceeds their actual tax liability, they receive a refund. If it falls short, they pay the balance as self-assessment tax.
TDS Rate Chart for FY 2025-26 (AY 2026-27)
Here are the key TDS rates applicable for common payment types in FY 2025-26.
| Section | Nature of Payment | Threshold Limit | TDS Rate |
|---|---|---|---|
| 192 | Salary | Basic exemption limit | Average slab rate |
| 194A | Interest (other than securities) | 40,000 (50,000 for senior citizens) | 10% |
| 194C | Contractor (Individual/HUF) | 30,000 single / 1,00,000 aggregate | 1% |
| 194C | Contractor (Others) | 30,000 single / 1,00,000 aggregate | 2% |
| 194H | Commission and Brokerage | 15,000 | 5% |
| 194I(a) | Rent (Plant and Machinery) | 2,40,000 | 2% |
| 194I(b) | Rent (Land, Building, Furniture) | 2,40,000 | 10% |
| 194J | Professional / Technical Fees | 30,000 | 10% |
| 194J | Technical Services (call centres) | 30,000 | 2% |
| 194Q | Purchase of Goods | 50,00,000 | 0.1% |
| 194-IA | Purchase of Immovable Property | 50,00,000 | 1% |
| 194R | Perquisites and Benefits | 20,000 | 10% |
| 195 | Payments to Non-Residents | Nil | As per Act/DTAA |
If the deductee does not provide their PAN, TDS must be deducted at the rate of 20 percent or the applicable rate, whichever is higher, under Section 206AA. Always collect and verify PAN from deductees before making payments.
TDS Return Due Date Calendar for FY 2025-26
| Quarter | Period | Non-Government Deductors | Government Deductors |
|---|---|---|---|
| Q1 | April to June 2025 | 31 July 2025 | 31 July 2025 |
| Q2 | July to September 2025 | 31 October 2025 | 31 October 2025 |
| Q3 | October to December 2025 | 31 January 2026 | 31 January 2026 |
| Q4 | January to March 2026 | 31 May 2026 | 31 May 2026 |
TDS deducted during any month must be deposited by the 7th of the following month. For March, the deposit deadline is 30 April. For example, TDS deducted in July must be deposited by 7 August. Late deposit attracts interest at 1.5 percent per month under Section 201(1A).
Step 1: Register for TAN
If you do not already have a TAN, apply using Form 49B on the NSDL-TIN website. TAN is a mandatory identifier for all TDS-related transactions. It must be quoted on every TDS challan, return, certificate, and correspondence with the Income Tax Department.
TAN registration typically takes 7 to 10 working days. The fee is approximately 65 rupees plus applicable taxes. Once allotted, TAN remains valid for the lifetime of the entity.
Step 2: Deduct TDS at the Correct Rates
For each payment, identify the applicable TDS section, verify the threshold limit, and deduct TDS at the prescribed rate. Key checks before deduction include:
- PAN verification: Verify the deductee PAN using the Income Tax portal utility. An invalid PAN triggers higher TDS at 20 percent
- Section 206AB check: Check the non-filer status of the deductee on the compliance check utility. Non-filers attract TDS at twice the applicable rate or 5 percent, whichever is higher
- Lower deduction certificate: Check if the deductee holds a Section 197 certificate for reduced or nil TDS
- Threshold verification: Track cumulative payments to each deductee during the year against the applicable threshold
TDS is calculated on the base amount excluding GST, provided the GST component is separately shown in the invoice. If the invoice shows a consolidated amount without separating GST, TDS applies on the entire amount. Always ask vendors to separately itemise GST on invoices to reduce the TDS burden.
Step 3: Deposit TDS Using Challan 281
TDS must be deposited with the government through Challan 281 via the OLTAS portal or net banking. Follow these steps.
- Go to the OLTAS portal at tin-nsdl.com and select Challan 281
- Enter the TAN, assessment year (use 2026-27 for FY 2025-26 deductions), and type of payment
- Select the nature of deduction (company or non-company deductor)
- Choose the section code based on the type of TDS (e.g., 94C for contractor, 94J for professional fees)
- Enter the amount and proceed to payment through net banking
- After successful payment, download the challan receipt noting the BSR code, serial number, and date
Record the BSR code (7-digit bank branch code), challan serial number, and date of deposit for every challan payment. These three details are essential for matching challans in the TDS return. Any error in these fields will cause a mismatch and may lead to a demand notice from the CPC-TDS.
Step 4: Prepare the TDS Return
Download the latest version of the Return Preparation Utility (RPU) from the Protean eGov Technologies website. The RPU is free software that generates returns in the format accepted by the Income Tax Department.
Selecting the Correct Form
| Form | Used For | Key Details |
|---|---|---|
| 24Q | TDS on Salary | Employee salary details, tax computation, exemptions, deductions. Q4 requires detailed Annexure II with employee-wise salary breakup |
| 26Q | TDS on Non-Salary (Residents) | Contractor, rent, professional fees, interest, commission payments to resident deductees |
| 27Q | TDS on Non-Residents | Payments to non-residents and foreign companies under Section 195 and related sections |
| 27EQ | TCS Collection | Tax Collected at Source on sale of specified goods, foreign remittances, etc. |
Data Entry in RPU
- Deductor details: TAN, PAN, name, address, status, and responsible person details
- Challan details: BSR code, challan date, serial number, total amount deposited, TDS amount, surcharge, cess
- Deductee records: PAN of deductee, name, section code, date of payment/credit, amount paid, TDS deducted, date of deduction
- For Form 24Q Q4: Complete salary annexure with gross salary, exemptions, deductions under Chapter VI-A, and tax computation
Step 5: Validate Using FVU
After generating the return file in RPU, validate it using the File Validation Utility (FVU) to check for errors. Common errors flagged by FVU include:
- Invalid or incorrect PAN of deductees
- Challan amount mismatch with deductee-level TDS totals
- Duplicate deductee records for the same section and date
- Incorrect section code for the type of payment
- BSR code, serial number, or date mismatch with OLTAS records
- Missing or invalid TAN of the deductor
Fix all errors identified by the FVU and re-validate until the file passes without any issues. The validated .fvu file is ready for upload.
Step 6: Upload the Return on the e-Filing Portal
- Log in to the Income Tax e-filing portal at incometax.gov.in using the TAN
- Navigate to "e-File" and then "Income Tax Forms"
- Select the appropriate form (24Q, 26Q, 27Q, or 27EQ) and the relevant quarter
- Upload the validated .fvu file
- Authenticate using DSC or EVC (generated through net banking or Aadhaar OTP linked to the TAN holder)
- Submit the return and download the acknowledgement receipt
- Note the provisional receipt number and token number for future reference and corrections
Need help with TDS return filing and compliance?
Explore Our Accounting and Tax ServicesStep 7: Issue TDS Certificates
After the return is processed by CPC-TDS, download the TDS certificates from the TRACES portal.
TDS Certificate Timelines
| Certificate | For | Due Date for Issuance |
|---|---|---|
| Form 16 | Salary TDS (annual) | 15 June following the financial year end |
| Form 16A | Non-salary TDS (quarterly) | 15 days from the due date of TDS return filing |
| Form 16B | TDS on property purchase | 15 days from filing Form 26QB |
| Form 16C | TDS on rent (Section 194-IB) | 15 days from filing Form 26QC |
Step 8: File Correction Returns if Needed
If you discover errors in a filed return, you can file a correction statement on the TRACES portal. Common scenarios requiring corrections include wrong PAN of a deductee, incorrect challan details, additional transactions missed in the original return, and updated salary details for Form 24Q.
Types of Correction Statements
- C1: Update deductor details (address, contact, responsible person)
- C2: Update or add challan details
- C3: Add, delete, or modify deductee records linked to a challan
- C4: Update salary details in Form 24Q Annexure II
- C5: Correct PAN of a deductee without changing other details
Common Mistakes in TDS Return Filing
- Using the wrong assessment year: For FY 2025-26, the assessment year is 2026-27. Using the wrong AY causes the entire return to be mismatched
- Challan and return period mismatch: Ensure the challan dates fall within the correct quarter. A challan from Q2 should not be reported in Q3
- Incorrect section codes: Using 194J when 194C applies, or vice versa, leads to incorrect TDS rates and potential penalties
- Not checking Section 206AB status: Failing to check and apply higher TDS rates for non-filers can result in shortfall notices
- Missing Form 24Q Annexure II: For Q4 salary returns, the detailed salary computation for each employee is mandatory. Omitting it causes processing failures
- Not reconciling with books: The TDS claimed in returns should match the TDS ledger in your accounting records. Mismatches trigger scrutiny
Penalties and Consequences Summary
| Default | Section | Penalty / Consequence |
|---|---|---|
| Non-deduction of TDS | 201(1A) | Interest at 1% per month from due date of deduction |
| Late deposit of TDS | 201(1A) | Interest at 1.5% per month from date of deduction to deposit |
| Late filing of return | 234E | 200 rupees per day (max: total TDS amount) |
| Failure to file / incorrect return | 271H | 10,000 to 1,00,000 rupees penalty |
| Expense disallowance | 40(a)(ia) | 30% of payment disallowed as business expense |
| Non-issuance of TDS certificate | 272A(2)(g) | 100 rupees per day per certificate (max: TDS amount) |
| Failure to deduct/deposit (prosecution) | 276B | Imprisonment 3 months to 7 years plus fine |
Conclusion
TDS return filing is a quarterly compliance obligation that every deductor must take seriously. The process involves deducting the correct TDS at the right time, depositing it through Challan 281 by the 7th of the following month, preparing returns using RPU software, validating with FVU, uploading on the e-filing portal, and issuing certificates from TRACES.
The penalties for non-compliance are substantial, with daily late fees, interest charges, expense disallowance, and even prosecution in severe cases. The key to smooth TDS compliance is maintaining proper records, reconciling deductions with accounting books, and filing returns well before the due dates.
If your business needs professional support with TDS deduction, challan management, return filing, and certificate generation, our team of Chartered Accountants at IncorpX provides end-to-end TDS compliance services for companies, LLPs, and individuals across India.
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Frequently Asked Questions
What is TDS?
TDS stands for Tax Deducted at Source. It is a mechanism under the Income Tax Act 1961 where the person making a payment (the deductor) deducts a certain percentage of tax before making the payment to the recipient (the deductee). The deducted amount is deposited with the government on behalf of the deductee, who can claim credit for it when filing their income tax return.
Who is required to deduct TDS?
Any person or entity making specified payments above the threshold limits is required to deduct TDS. This includes companies, partnership firms, LLPs, sole proprietors (if subject to tax audit), government bodies, trusts, associations, and individuals making payments such as salary, rent, professional fees, contractor payments, interest, commission, and brokerage. Individuals and HUFs not liable for tax audit are exempt from TDS obligations on most payments except rent above 50,000 rupees per month (Section 194-IB).
What is the difference between TDS and TCS?
TDS (Tax Deducted at Source) is deducted by the payer from the payment before releasing it to the payee. TCS (Tax Collected at Source) is collected by the seller from the buyer at the time of sale. For example, TDS is deducted on salary, rent, and professional fees, while TCS is collected on the sale of certain goods like scrap, timber, minerals, motor vehicles, and foreign remittances above specified limits.
What are the quarterly TDS return due dates?
TDS returns are filed quarterly. For Q1 (April to June), the due date is July 31. For Q2 (July to September), it is October 31. For Q3 (October to December), it is January 31. For Q4 (January to March), it is May 31 of the following year. Government deductors have different due dates: Q1 to Q3 due on July 31, October 31, and January 31 respectively, and Q4 is due on May 31.
What are Forms 24Q, 26Q, 27Q, and 27EQ?
Form 24Q is for quarterly TDS on salary payments. Form 26Q is for quarterly TDS on all non-salary payments to resident deductees. Form 27Q is for quarterly TDS on payments to non-residents and foreign companies. Form 27EQ is for quarterly statement of TCS (Tax Collected at Source). Each form captures specific information relevant to its category.
What is Challan 281?
Challan 281 (ITNS 281) is the prescribed challan for depositing TDS and TCS with the government. It is available on the OLTAS portal and through net banking. The challan requires details like TAN of the deductor, assessment year, type of payment (company or non-company), nature of payment (TDS on salary, non-salary, etc.), and the amount being deposited.
What is the penalty for late filing of TDS returns?
Under Section 234E, a late filing fee of 200 rupees per day is charged until the return is filed, subject to a maximum of the total TDS amount. Under Section 271H, the Assessing Officer can impose a penalty ranging from 10,000 to 1,00,000 rupees for failure to file or for filing incorrect TDS returns. Additionally, Section 201(1A) charges interest at 1.5 percent per month on late deposit of TDS.
What is the interest on late deposit of TDS?
If TDS is deducted but not deposited with the government on time, interest is charged under Section 201(1A). The interest rate is 1.5 percent per month (or part of the month) from the date of deduction to the date of actual deposit. If TDS is not deducted at all when it should have been, interest is charged at 1 percent per month from the date the TDS should have been deducted to the date of actual deduction.
What is the TRACES portal?
TRACES (TDS Reconciliation Analysis and Correction Enabling System) is the government portal at tdscpc.gov.in for managing TDS returns. It allows deductors to download Form 16, Form 16A, view challan status, file correction statements, track return processing status, and check for defaults. Deductees can view their Form 26AS (tax credit statement) and verify TDS credits on this portal.
What happens if TDS is deducted but the return is not filed?
If TDS is deducted and deposited but the return is not filed, the deductee will not see the TDS credit in their Form 26AS and cannot claim credit when filing their income tax return. The deductor will face a late filing fee of 200 rupees per day under Section 234E and a potential penalty of 10,000 to 1,00,000 rupees under Section 271H. Additionally, the deductee may receive a notice from the IT Department for tax mismatch.
What is the TDS rate chart for FY 2025-26?
Key TDS rates for FY 2025-26 include: Section 192 (Salary) at applicable slab rates, Section 194A (Interest) at 10%, Section 194C (Contractor - Individual/HUF) at 1%, Section 194C (Contractor - Others) at 2%, Section 194H (Commission) at 5%, Section 194I (Rent - Plant/Machinery) at 2%, Section 194I (Rent - Land/Building) at 10%, Section 194J (Professional/Technical Fees) at 10%, Section 194J (Technical Services to call centres) at 2%, and Section 195 (Payment to Non-Resident) at rates specified in the Act or DTAA.
What is the threshold limit for TDS deduction?
Each TDS section has a threshold limit below which TDS is not required. For example, Section 194C (Contractor) has a limit of 30,000 rupees for a single payment and 1,00,000 rupees for aggregate payments in a year. Section 194J (Professional fees) has a limit of 30,000 rupees per annum. Section 194I (Rent) has a limit of 2,40,000 rupees per annum. Section 194A (Interest from bank) has a limit of 40,000 rupees (50,000 rupees for senior citizens).
Can TDS return be revised or corrected?
Yes, TDS returns can be revised by filing a correction return on the TRACES portal. There are different types of corrections: C1 for updating deductor details, C2 for updating challan details, C3 for updating or adding deductee records, C4 for updating salary details in Form 24Q, and C5 for updating PAN of deductees. The correction statement must reference the original return provisional receipt number and token number.
What is Form 26AS?
Form 26AS is the Annual Tax Statement that shows all TDS, TCS, advance tax, self-assessment tax, and refunds related to a PAN. It is available on the TRACES portal and the Income Tax e-filing portal. Deductees use Form 26AS to verify that the TDS deducted by their employer, bank, or other deductors has been correctly deposited and reported. Any mismatch between Form 26AS and the income tax return can trigger an IT notice.
What is the difference between Form 16 and Form 16A?
Form 16 is the TDS certificate issued by the employer to the employee for TDS deducted on salary. It is issued annually and contains two parts: Part A (TDS summary from TRACES) and Part B (salary computation details). Form 16A is the TDS certificate for non-salary deductions (rent, professional fees, contract payments, etc.) and is issued quarterly to each deductee.
What is Section 194Q and when does it apply?
Section 194Q requires a buyer to deduct TDS at 0.1 percent on the purchase of goods exceeding 50 lakh rupees from a resident seller in a financial year. This section applies only if the buyer turnover or gross receipts exceed 10 crore rupees in the preceding financial year. Section 194Q does not apply if the seller is already liable to collect TCS under Section 206C(1H) on the same transaction.
What software is used for preparing TDS returns?
The NSDL/Protean provides a free Return Preparation Utility (RPU) for preparing TDS returns in the prescribed format. Popular third-party software includes Gen TDS by SAG Infotech, Saral TDS by Relyon Softech, Winman TDS, and EasyOffice TDS. Accounting software like Tally Prime, Zoho Books, and Busy also have built-in TDS return preparation modules. The return must pass validation through the File Validation Utility (FVU) regardless of which software is used.
What is the due date for depositing TDS?
TDS deducted during any month must be deposited by the 7th of the following month. For example, TDS deducted in June must be deposited by July 7. The only exception is TDS deducted in March, which can be deposited by April 30. Government deductors must deposit TDS on the same day of deduction for payments made without the production of a challan.
What is Section 206AB and how does it affect TDS?
Section 206AB is a special provision for TDS on non-filers of income tax returns. If the deductee has not filed income tax returns for both of the two preceding assessment years and the aggregate TDS/TCS in each year was 50,000 rupees or more, TDS must be deducted at a higher rate. The higher rate is twice the applicable rate or 5 percent, whichever is higher. Deductors should check the non-filer status using the Income Tax compliance check utility on the e-filing portal.
How to file TDS return for the first time?
For first-time filers, register the TAN on the Income Tax e-filing portal at incometax.gov.in. Download the RPU and FVU from the Protean website. Prepare the return by entering deductor details, challan details (BSR code, date, serial number, amount), and deductee-wise transaction details. Validate using FVU, and upload the .fvu file on the e-filing portal. Authenticate using DSC or EVC. First-time filers should also register on the TRACES portal for downloading certificates.
What is the TDS on salary under Section 192?
Section 192 requires every employer to deduct TDS from salary at the average income tax rate applicable to the employee estimated total income for the financial year. The employer must consider all exemptions (HRA, LTA), deductions (Section 80C, 80D, etc.), and the chosen tax regime (old or new). If the employee total income is below the basic exemption limit, no TDS needs to be deducted. Employees should submit investment declaration proofs to their employer for correct TDS computation.
What is a nil TDS return?
A nil TDS return is filed when the deductor had no TDS obligations during the quarter because no payments exceeding the threshold limits were made. While there is no mandatory requirement to file a nil return, some deductors file it to maintain their compliance record and avoid potential notices from the IT Department. If you had TDS obligations but deducted nil amount, that is a default, not a nil return.
What is Section 197 lower TDS certificate?
Section 197 allows a deductee to apply for a certificate from the Assessing Officer to receive payments with TDS at a lower rate or nil rate. This is useful when the deductee actual tax liability is significantly lower than the TDS being deducted. The application is filed in Form 13, and the certificate is valid for the specified period. The deductor must deduct TDS at the reduced rate or nil rate specified in the certificate.
How does GST affect TDS calculations?
TDS is deducted on the base amount excluding GST, provided the GST component is separately shown in the invoice. If the invoice shows a lump sum amount without separating GST, TDS is deducted on the total amount including GST. For example, if a professional fee invoice shows 1,00,000 rupees plus 18,000 rupees GST, TDS at 10 percent is calculated on 1,00,000 rupees only (10,000 rupees TDS). This clarification was issued by CBDT Circular No. 23/2017.
What is TDS under Section 194-IA on property purchase?
Section 194-IA requires the buyer of immovable property (other than agricultural land) to deduct TDS at 1 percent of the sale consideration if the value exceeds 50 lakh rupees. The TDS must be deposited using Form 26QB within 30 days of deduction. After deposit, the buyer issues Form 16B to the seller. This section applies to individuals and HUFs as well, not just businesses.
What records should a deductor maintain?
Every deductor must maintain detailed records including: TDS deduction register with deductee details, payment vouchers with TDS calculations, challan payment receipts with BSR codes and serial numbers, copies of TDS returns filed with acknowledgement numbers, TDS certificates issued (Form 16/16A), lower or nil deduction certificates received from deductees, and correspondence with the Income Tax Department. These records must be maintained for at least 7 years from the end of the relevant assessment year.
What is the penalty for non-deduction of TDS?
If a person fails to deduct TDS when required, they are treated as an assessee in default under Section 201. The consequences include: interest at 1 percent per month from the date TDS should have been deducted to the date of actual deduction, disallowance of the expense under Section 40(a)(ia) while computing business income (30 percent of the payment amount), and potential prosecution proceedings under Section 276B with imprisonment up to 7 years.
How to check TDS challan status?
TDS challan status can be checked on the OLTAS portal at tin-nsdl.com by entering either the CIN (Challan Identification Number) or the TAN. The CIN-based search requires the BSR code, challan tender date, and amount. The TAN-based search shows all challans deposited against a TAN for a specified period. Challan status should be verified before preparing the TDS return to ensure all deposits are correctly captured.
What is the process for TDS on payments to non-residents?
TDS on payments to non-residents is governed by Section 195 and must be deducted at the rates specified in the Income Tax Act or the Double Taxation Avoidance Agreement (DTAA) between India and the recipient country, whichever is more beneficial to the deductee. The deductor must obtain a Tax Residency Certificate (TRC) from the deductee to claim DTAA benefits. Form 27Q is used for filing the quarterly return for such deductions.
Can TDS be deducted in advance before payment?
TDS should be deducted either at the time of credit to the payee account or at the time of actual payment, whichever is earlier. There is no provision for deducting TDS in advance before the liability arises. Premature deduction without a corresponding payment obligation is not valid under the Income Tax Act.
What is the role of a CA in TDS compliance?
A Chartered Accountant assists with TDS compliance by determining applicable TDS sections and rates, verifying deductee PAN details and Section 206AB compliance status, preparing and validating TDS returns, filing returns on the e-filing portal, downloading and issuing TDS certificates, handling correction returns, responding to demand notices, and ensuring timely deposit and filing to avoid penalties. The accounting services typically include TDS management as part of the overall package.
What is AIS (Annual Information Statement) and how is it related to TDS?
The Annual Information Statement (AIS) is an expanded version of Form 26AS available on the Income Tax e-filing portal. It includes details of all financial transactions reported by various entities including TDS, TCS, SFTs (Specified Financial Transactions), interest income, dividends, mutual fund purchases, share transactions, and more. Deductees should cross-verify their AIS with TDS certificates to ensure all credits are accurately captured.
What happens if the deductee PAN is incorrect in the TDS return?
If the deductee PAN is incorrect or invalid, the TDS credit will not reflect in the deductee Form 26AS. The deductee will not be able to claim the TDS credit when filing their income tax return. The deductor must file a correction return (Type C5) on TRACES to update the PAN. Until corrected, the TDS amount remains unclaimed and the deductee may face a tax demand from the IT Department.
What is Section 194R on perquisites and benefits?
Section 194R, introduced in 2022, requires TDS at 10 percent on the value of any benefit or perquisite (whether in cash or kind) arising from business or profession, provided to a resident, if the aggregate value exceeds 20,000 rupees in a financial year. This covers freebies, gifts, sponsorships, and incentives given by businesses to other businesses or professionals. It does not apply to salary perquisites (which are covered under Section 192).
How to handle TDS when an employee changes jobs mid-year?
When an employee joins a new employer mid-year, the new employer can consider TDS already deducted by the previous employer while computing the balance TDS liability. The employee must submit Form 12B to the new employer providing details of salary and TDS from the previous employer along with Form 16 from the previous employer. The new employer then accounts for the previous income and TDS while computing the remaining TDS on salary for the balance period.
What is the consequence of not issuing TDS certificates?
Failure to issue TDS certificates (Form 16 or Form 16A) within the prescribed time is an offence under Section 272A(2)(g). A penalty of 100 rupees per day of default is imposable for each certificate not issued, subject to a maximum of the TDS amount. Timely issuance of certificates is important because deductees depend on them to claim TDS credit in their income tax returns.
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