Tax Deducted at Source (TDS) is a mechanism under the Income Tax Act, 1961 where the payer deducts a portion of the payment as tax and remits it to the government on behalf of the payee. This guide covers the key TDS sections applicable for FY 2024-25, the threshold limits, applicable rates, deposit due dates, quarterly return deadlines, and penalties.
Key Takeaways
- TDS must be deposited by the 7th of the following month (except March, where it's 30 April)
- Quarterly TDS returns: 31 July, 31 October, 31 January, 31 May
- Interest for late deduction: 1% per month from date payable to date deducted
- Interest for late deposit: 1.5% per month from date deducted to date deposited
- PAN not furnished: TDS at 20% or the applicable rate, whichever is higher
- Section 194Q applies when buyer's turnover exceeds ₹10 crore (0.1% on purchases over ₹50 lakh)
Key TDS Sections, Rates, and Thresholds — FY 2024-25
Section 192 — Salary
| Particulars | Details |
|---|---|
| Who deducts | Employer |
| Rate | As per applicable income tax slab rates of the employee |
| Threshold | Above basic exemption limit |
| Regime | Employee declares regime; employer deducts accordingly |
| Form | Form 16 (TDS certificate issued to employee by 15 June) |
Salary TDS is the most common form of TDS. Employers estimate annual salary income, compute projected tax, and divide it equally over the remaining months. Employees should declare their deductions (Form 12BB) to avoid excess TDS.
See our detailed guide on TDS on salary and Form 16 for the complete calculation methodology.
Section 194C — Payment to Contractors and Sub-contractors
| Particulars | Details |
|---|---|
| Nature of payment | Any work contract, labour supply, advertising, carriage of goods |
| Rate — Individual / HUF | 1% |
| Rate — Others (firm, company) | 2% |
| Threshold — Single payment | ₹30,000 |
| Threshold — Aggregate per year | ₹1,00,000 |
When no TDS under 194C: If the contractor provides self-declaration in Form 15G / 15H (if applicable) or produces a nil/lower deduction certificate under Section 197.
Section 194J — Fees for Professional or Technical Services
| Nature | Rate |
|---|---|
| Fee for professional services (legal, medical, engineering, accountancy, etc.) | 10% |
| Fee for technical services (non-professional technical work) | 2% |
| Royalty for films shown on TV/radio | 2% |
| Call centre services | 2% |
| Director's remuneration (not salary) | 10% |
Threshold: ₹30,000 per payee per financial year.
Businesses paying consultants, freelancers, or technical service firms should check whether the payment qualifies as professional (10%) or technical (2%) — the distinction has practical importance for IT companies and BPOs.
Section 194H — Commission or Brokerage
| Particulars | Details |
|---|---|
| Nature of payment | Commission or brokerage (not including insurance commission) |
| Rate | 5% |
| Threshold | ₹15,000 per financial year |
Applies to stock brokers, franchise fees, real estate brokerage paid to individuals, and similar arrangements.
Section 194I — Rent
| Nature of Rent | TDS Rate |
|---|---|
| Rent of plant, machinery, or equipment | 2% |
| Rent of land, building, or furniture | 10% |
Threshold: ₹2,40,000 per payee per financial year.
Businesses paying rent to landlords for office or commercial premises must deduct 10% TDS if annual rent exceeds ₹2,40,000. Individual and HUF payers are exempt unless their accounts are subject to audit.
Section 194IB — Rent by Individual / HUF (not under audit)
| Particulars | Details |
|---|---|
| Nature of payment | Monthly rent above ₹50,000 paid by individual/HUF not under tax audit |
| Rate | 5% |
| Deduction timing | Last month of tenancy or March, whichever is earlier |
This section was introduced to bring residential rental income into the TDS net. The TDS is deducted once a year (typically in March or when the tenancy ends), not monthly.
Section 194Q — Purchase of Goods
| Particulars | Details |
|---|---|
| Who deducts | Buyer whose annual turnover exceeded ₹10 crore in the preceding financial year |
| Nature | Purchase of goods from a resident seller |
| Rate | 0.1% |
| Threshold | ₹50 lakh from one seller in the financial year |
This section was inserted to capture large-value goods transactions. It is a buyer's obligation. If both Section 194Q (buyer's TDS) and Section 206C(1H) (seller's TCS) apply to the same transaction, only Section 194Q applies.
Other Commonly Applicable TDS Sections
| Section | Nature of Payment | Rate | Threshold |
|---|---|---|---|
| 194A | Interest (other than on securities) from banks, cooperatives, post offices | 10% | ₹40,000 (banks); ₹5,000 (others) |
| 194B | Winnings from lottery, puzzles, game shows | 30% | ₹10,000 |
| 194D | Insurance commission | 5% | ₹15,000 |
| 194DA | Payment under life insurance policy (taxable portion) | 5% | ₹1,00,000 |
| 194E | Payment to non-resident sportsmen/entertainers | 20% + surcharge + cess | No threshold |
| 194EE | Payment from National Savings Scheme | 10% | ₹2,500 |
| 194G | Commission on lottery tickets | 5% | ₹15,000 |
| 194IA | Sale consideration for immovable property (buyer deducts) | 1% | ₹50 lakh |
| 194LBA | Distribution of income by business trust | 10% / 5% | — |
| 194N | Cash withdrawal from banks above ₹1 crore / ₹20 lakh | 2% / 2% | ₹1 crore (normal); ₹20 lakh (non-filer) |
| 194O | Payment to e-commerce participants by e-commerce operators | 1% | ₹5 lakh (individuals with PAN/Aadhaar) |
| 194R | Benefits or perquisites from business | 10% | ₹20,000 |
| 194S | Transfer of virtual digital assets (crypto, NFT) | 1% | ₹50,000 (specified persons); ₹10,000 (others) |
TDS Deposit Due Dates
TDS deducted must be deposited with the government using Challan 281 through designated bank branches or online via the tax portal.
| Month of Deduction | Due Date for Deposit |
|---|---|
| April | 7 May |
| May | 7 June |
| June | 7 July |
| July | 7 August |
| August | 7 September |
| September | 7 October |
| October | 7 November |
| November | 7 December |
| December | 7 January |
| January | 7 February |
| February | 7 March |
| March | 30 April |
The March exception is important — many businesses miss the 30 April deadline and incur interest for the entire month.
Quarterly TDS Return Due Dates
TDS returns (Form 24Q for salary, Form 26Q for non-salary, Form 27Q for non-resident, Form 27EQ for TCS) must be filed every quarter:
| Quarter | Period | Due Date |
|---|---|---|
| Q1 | April – June | 31 July |
| Q2 | July – September | 31 October |
| Q3 | October – December | 31 January |
| Q4 | January – March | 31 May |
Quarterly return filing is a key TDS compliance requirement. Late returns attract a fee under Section 234E and penalty under Section 271H.
Penalties and Interest for TDS Non-Compliance
Interest Charges
| Default | Interest Rate |
|---|---|
| Failure to deduct TDS | 1% per month (or part thereof) from the date tax was deductible to date of actual deduction |
| Failure to deposit TDS | 1.5% per month (or part thereof) from the date of deduction to date of deposit |
Interest is calculated on a month-to-month basis — even a one-day delay in a particular month is treated as a full month.
Late Filing Fee — Section 234E
₹200 per day of delay in filing the quarterly TDS return, subject to a maximum of the TDS amount for that quarter. This fee is mandatory and must be paid before filing the belated return.
Penalty — Section 271H
₹10,000 to ₹1,00,000 for failing to file quarterly returns within one year of the due date. Note that Section 271H penalty is in addition to Section 234E late fee, not a substitute.
Prosecution — Section 276B
Failure to deposit TDS can attract prosecution with rigorous imprisonment from 3 months to 7 years along with a fine. This is rare and usually applies to deliberate and systematic non-compliance, not isolated delays with reasonable cause.
PAN Not Furnished — Section 206AA
If the payee has not provided a valid PAN, TDS must be deducted at the higher of:
- The rate in the applicable section
- The rate of 20%
This often catches businesses that make payments to unregistered vendors or individuals who don't share PAN details.
TDS Certificates — Timelines
| Certificate | Issued By | For | Due Date |
|---|---|---|---|
| Form 16 (Part A) | Employer | Salary TDS | 15 June of the following year |
| Form 16 (Part B) | Employer | Detailed salary breakup | 15 June of the following year |
| Form 16A | Deductor (non-salary) | All non-salary TDS | 15 days after due date of quarterly return |
Payees use TDS certificates to verify the credit reflected in their Form 26AS and file their income tax returns accurately.
Practical Compliance Checklist for Businesses
- Obtain TAN (Tax Deduction Account Number) before deducting TDS — mandatory
- Track all payments to contractors, professionals, rent recipients, and others subject to TDS
- Verify PAN of all payees; apply 20% if PAN is not furnished
- Deposit TDS by the 7th of the following month (30 April for March deductions)
- File quarterly returns (24Q / 26Q) by the due dates
- Issue Form 16 / 16A to payees on time
- Reconcile TDS credits in TRACES to avoid disputes with payees
- Maintain challans and payment receipts for at least 6 years
Proper accounting and bookkeeping practices make TDS reconciliation significantly easier — when all vendor payments are categorised correctly in your books, TDS calculations and return filings become straightforward.
This article is for general informational purposes only and does not constitute professional advice. TDS rates, thresholds, and due dates are specified under the Income Tax Act and may be modified by government notifications or budget amendments. Consult a qualified Chartered Accountant for guidance specific to your business.
Frequently Asked Questions
What is the due date for depositing TDS for March?
TDS deducted in March must be deposited by 30 April of the same year. This is an exception to the standard rule of 7th of the following month that applies to all other months.
What happens if TDS is deducted but not deposited on time?
Interest is charged at 1.5% per month (or part of month) from the date TDS was deducted to the date of actual deposit. Additionally, the deductor may face prosecution and penalty under Section 276B of the Income Tax Act.
What is the TDS threshold for Section 194C (contractor payments)?
TDS under Section 194C applies when a single payment exceeds ₹30,000 or the aggregate payments to one contractor in a financial year exceed ₹1,00,000. Below these limits, TDS is not required.
What are the quarterly TDS return due dates?
Q1 (Apr–Jun): 31 July; Q2 (Jul–Sep): 31 October; Q3 (Oct–Dec): 31 January; Q4 (Jan–Mar): 31 May. Form 24Q is for salary TDS; Form 26Q is for non-salary payments.
Is TDS applicable if the payee furnishes a nil or lower TDS certificate?
Yes, but at a reduced or nil rate. If the payee obtains a certificate under Section 197 from the Assessing Officer stating nil or lower TDS, the deductor must deduct at the rate mentioned in the certificate, not the standard rate.