TDS (Tax Deducted at Source) ensures the government collects tax at the point where income is generated — not at the end of the year. If you pay rent, professional fees, contractor payments, or salaries, you are likely required to deduct TDS. Getting it wrong means penalties and interest.
You owe ₹1,00,000 to a contractor for services rendered.
You deduct TDS at 10% (₹10,000) and pay the contractor ₹90,000.
You deposit ₹10,000 to the government by 7th of next month via challan.
You file quarterly TDS return (Form 26Q) reporting all deductions.
You issue TDS certificate (Form 16A) to the contractor as proof of deduction.
The contractor claims ₹10,000 as tax credit when filing their income tax return.
| Section | Nature of Payment | TDS Rate | Threshold |
|---|---|---|---|
| 192 | Salary | Slab rates | Basic exemption |
| 194A | Interest (other than securities) | 10% | ₹40,000/yr |
| 194C | Contractor payments | 1% / 2% | ₹30,000 single / ₹1L aggregate |
| 194H | Commission / Brokerage | 5% | ₹15,000/yr |
| 194I | Rent | 2% (plant) / 10% (land/building) | ₹2,40,000/yr |
| 194J | Professional / Technical Fees | 10% | ₹30,000/yr |
| 194Q | Purchase of Goods | 0.1% | ₹50L/yr |
| 194O | E-commerce operator payments | 1% | ₹5L/yr |
TDS on Salary — filed quarterly
Who files: All employers
TDS on non-salary payments — filed quarterly
Who files: Businesses making payments subject to TDS
TDS on payments to NRIs — filed quarterly
Who files: Anyone paying non-residents
TCS (Tax Collected at Source) — filed quarterly
Who files: Sellers collecting TCS
| Quarter | Period | Deposit Due | Return Due |
|---|---|---|---|
| Q1 | April – June | 7th of next month | July 31 |
| Q2 | July – September | 7th of next month | October 31 |
| Q3 | October – December | 7th of next month | January 31 |
| Q4 | January – March | 7th of next month (Mar: April 30) | May 31 |
TDS is income tax deducted at the point of payment — it's the government's way of collecting tax throughout the year
Key TDS sections: 194C (contractors), 194J (professionals), 194I (rent), 194A (interest), 192 (salary)
Deposit TDS by 7th of the following month. File quarterly returns (24Q for salary, 26Q for others)
No PAN = 20% TDS rate. Always collect PAN/Aadhaar from payees before making payments
TDS credits appear in Form 26AS — always verify before filing income tax return to claim full credit