TDS Compliance Services in India — Tax Deducted at Source
Tax Deducted at Source (TDS) is a withholding tax mechanism under the Income Tax Act 1961 — designed to collect tax at the point of payment itself, rather than waiting for annual ITR filing. The payer (deductor) withholds a prescribed percentage of tax from specified payments and deposits it with the Government, while the payee (deductee) claims credit for this tax in their ITR.
TDS applies to a vast range of payments — salaries, professional and technical fees, contractor payments, rent, interest, commission, dividends, property purchases, and more. It contributes over 40% of India's gross direct tax revenue annually. Non-compliance — failure to deduct, short deduction, late deposit, or late filing — carries significant financial and legal consequences.
⚠ Critical 2025-26 Update — Finance Act 2025 significantly raised TDS thresholds across multiple sections effective 1 April 2025. Critical 2026 Update — The Income Tax Act 2025 (effective 1 April 2026) retires the entire 194-series. TDS on salary moves to Section 392. All other TDS moves to Section 393. TCS moves to Section 394. Old section codes must NOT be used on returns filed for April 2026 transactions onwards.
Our Comprehensive TDS Services
TAN Registration
Every entity required to deduct TDS must hold a TAN (Tax Deduction Account Number). We obtain TAN through NSDL within 3-5 working days. Operating without TAN attracts a Rs.10,000 penalty. Note: Under the Income Tax Act 2025, TAN continues unchanged — no new TAN is required.
TDS Computation and Payment
We compute TDS liability for every applicable payment category — across all relevant sections. Monthly ITNS 281 challans are prepared and deposited within due dates. We maintain a complete deductors' register with challan-level details for every deduction, enabling clean 26AS reconciliation and error-free return filing.
Quarterly TDS Return Filing
We file all TDS returns on time: Form 24Q (salary TDS) and Form 26Q (non-salary resident TDS) quarterly; Form 27Q (payments to non-residents); and Form 27EQ (TCS). Each return is prepared with complete deductee-level data, PAN validations, and challan matching before upload to TRACES/CPC. Late filing fee under Section 234E is Rs.200 per day.
Form 16, Form 16A, and Form 27D Issuance
We generate and issue TDS certificates within statutory deadlines — Form 16 (salary) by 15 June; Form 16A (non-salary) within 15 days of return filing due date. From FY 2026-27, Form 16 is replaced by Form 130 under the Income Tax Act 2025. We issue certificates in the correct form for the correct period.
AIS and Form 26AS Reconciliation
AIS (Annual Information Statement) and Form 26AS are the Department's master view of all tax transactions against a PAN. We reconcile your TDS deposit and deduction records with both documents monthly — catching challan mismatches, PAN errors, and unreflected credits before they generate notices.
TDS Notice and Demand Response
We handle all TDS notices — short deduction demands under Section 200A, default assessments under Section 201, TRACES notices, CPC processing corrections, and high-value transaction queries. Our CA team drafts detailed, document-supported replies within the statutory deadline.
Lower Deduction Certificate — Form 13
Where a deductee's actual tax liability is significantly lower than the standard TDS rate, a lower or nil TDS certificate (Form 13) can be obtained from the Assessing Officer. We prepare and file Form 13 applications — improving cash flow for businesses and professionals with legitimate lower-tax positions.
Section 195 — TDS on Payments to Non-Residents
Payments to non-residents that are chargeable to Indian income tax attract TDS under Section 195 (Section 393 from April 2026). The rate depends on income type (royalty, FTS, capital gains, business income) and the applicable DTAA. We compute Section 195 liability, prepare Form 15CA/15CB, and structure DTAA benefit claims with the required TRC and Form 10F documentation.
Finance Act 2025 — Updated TDS Thresholds (Effective 1 April 2025)
| Section | Nature of Payment | Old Threshold | New Threshold FY 25-26 |
|---|---|---|---|
| 194A | Interest (Banks/Cooperative/Post Office) | Rs.40,000 / Rs.50,000 (Sr.Cit.) | Rs.50,000 / Rs.1,00,000 (Sr.Cit.) |
| 194A | Interest (Other sources) | Rs.5,000 | Rs.10,000 |
| 194 | Dividend | Rs.5,000 | Rs.10,000 |
| 194H | Commission and Brokerage | Rs.15,000 | Rs.20,000 |
| 194I | Rent (Land/Building/Furniture) | Rs.2,40,000 p.a. | Rs.6,00,000 p.a. |
| 194IB | Rent by Individual/HUF (non-audit) | Rs.50,000/month @ 5% | Rs.50,000/month @ 2% |
| 194J | Professional and Technical Fees | Rs.30,000 | Rs.50,000 |
| 194T | Partner payments by Firm/LLP (new) | Not applicable earlier | Rs.20,000 @ 10% |
Key TDS Rates Summary — FY 2025-26
| Section | Payment Type | Rate | Rate (No PAN) |
|---|---|---|---|
| 192 | Salary | Slab rates | Slab rates |
| 194C | Contractor (Individual/HUF) | 1% | 20% |
| 194C | Contractor (Company/Firm/LLP) | 2% | 20% |
| 194I | Rent (Land/Building/Furniture) | 10% | 20% |
| 194I | Rent (Plant and Machinery) | 2% | 20% |
| 194J | Professional Services | 10% | 20% |
| 194J | Technical Services / Call Centre | 2% | 20% |
| 194IA | Purchase of Immovable Property | 1% | 20% |
| 195 | Payments to Non-Residents | As per nature/DTAA | N/A |
⚠ From 1 April 2026 (Income Tax Act 2025): Section 392 replaces 192 (salary TDS). Section 393 replaces all 194-series. Section 394 replaces all TCS provisions. Rates and thresholds unchanged for FY 2026-27. Old section codes will be rejected by the CPC portal for April 2026+ transactions.
Consequences of TDS Non-Compliance
| Default | Consequence |
|---|---|
| Non-deduction / Short deduction | Interest at 1% per month from due date of deduction to actual date of deduction |
| Late deposit of deducted TDS | Interest at 1.5% per month from date of deduction to date of deposit |
| Late filing of TDS return | Rs.200 per day under Section 234E (up to the TDS amount) |
| Incorrect / Non-filing | Penalty up to Rs.1 lakh under Section 271H |
| Non-deduction — business expense | 30% of payment disallowed as business expense under Section 40(a)(ia) |
Why Choose StartupDost for TDS?
- Fully updated for Finance Act 2025 thresholds — effective 1 April 2025
- Income Tax Act 2025 ready — Section 392/393/394, Form 130, Form 121
- Monthly AIS/26AS reconciliation — prevents mismatch notices
- PAN and TAN validation before every return filing
- Section 195 and DTAA expertise for cross-border payments
- Form 13 lower TDS certificate assistance
- Integrated with payroll, bookkeeping, and income tax services
20 Frequently Asked Questions — TDS Compliance
Q1. What is the most significant TDS change in Finance Act 2025?
The most impactful change is the Section 194I rent threshold — raised from Rs.2.4 lakh to Rs.6 lakh per year effective 1 April 2025. This means monthly rent below Rs.50,000 no longer attracts TDS, reducing compliance burden for thousands of businesses renting small commercial premises. The Section 194J professional fee threshold was also raised from Rs.30,000 to Rs.50,000.
Q2. What is the new Section 194T introduced in Finance Act 2024?
Section 194T (effective 1 April 2025) requires TDS at 10% on all payments to partners of a firm or LLP — salary, remuneration, commission, bonus, or interest — if aggregate exceeds Rs.20,000 per year. This is a new obligation that many partnership firms overlooked at inception. Under the Income Tax Act 2025 (from April 2026), this is consolidated into Section 393.
Q3. What is the Income Tax Act 2025 and how does it affect TDS?
The Income Tax Act 2025 replaced the Income Tax Act 1961 from 1 April 2026. For TDS, the entire 194-series (192, 194, 194A, 194C, 194H, 194I, 194J, 194IA, 194T, etc.) has been retired. Section 392 now governs salary TDS. Section 393 consolidates all other TDS into a single table using payment codes 1001-1092. Rates and thresholds are unchanged. Returns filed with old section codes for April 2026+ transactions will trigger CPC validation errors.
Q4. What is the difference between Form 26AS and AIS?
Form 26AS is the traditional TDS credit statement — primarily showing TDS/TCS reflected against your PAN. AIS (Annual Information Statement) is far more comprehensive: it captures TDS, advance tax, self-assessment tax, and specified financial transactions (SFT) — including share purchases, real estate, mutual fund investments, dividends, interest from all banks, and foreign remittances. AIS is the primary reconciliation tool for both taxpayers and tax officers during scrutiny.
Q5. What is TDS on property purchase under Section 194IA?
When buying immovable property (other than agricultural land) valued at Rs.50 lakh or more, the buyer must deduct TDS at 1% and deposit via Form 26QB within 30 days from month-end of the payment. For joint buyers or sellers, each buyer files a separate Form 26QB per seller. The seller receives Form 16B (from April 2026: an equivalent form under the new Act) as the TDS certificate.
Q6. Is TDS on GST-inclusive invoice amounts required?
TDS is deducted on the base invoice amount excluding GST, provided GST is separately stated on the invoice. If the invoice shows a single lump sum without separating GST, TDS is applied on the entire amount. Always ensure vendor invoices clearly show base amount and GST separately to avoid TDS being deducted on the GST component.
Q7. What is a TDS mismatch notice and how is it resolved?
A mismatch occurs when TDS credits in a deductee's Form 26AS don't match their ITR claims — typically due to wrong PAN quoted by deductor, incorrect amount, or challan deposited under wrong section. Resolution requires the deductor to file a TDS correction statement on TRACES, correcting deductee data, PAN, or challan details. Up to 7 correction rounds are possible.
Q8. What is the Section 40(a)(ia) TDS disallowance?
Section 40(a)(ia) disallows 30% of any payment (fees, rent, contractor amounts, etc.) as a business expense in the payer's income tax computation if TDS was not deducted, or after deduction was not deposited within the year. This disallowance directly increases the payer's taxable income and tax liability — making TDS compliance a hard bottom-line issue.
Q9. What are Forms 15G and 15H, and what replaces them in 2026?
Forms 15G (for individuals below 60) and 15H (for senior citizens above 60) are self-declarations submitted to deductors requesting nil TDS — based on the declaration that total income is below the taxable limit. Both forms are valid for one financial year. Under the Income Tax Act 2025 (effective FY 2026-27), both are merged into a single new Form 121.
Q10. What is Section 195 and how is DTAA benefit claimed?
Section 195 requires TDS on any payment to a non-resident that is chargeable to Indian income tax. DTAA (Double Taxation Avoidance Agreement) with the payee's country can reduce or eliminate TDS. To claim DTAA benefit, the non-resident must provide: Tax Residency Certificate (TRC), Form 10F (self-declaration), and a No Permanent Establishment declaration. We handle all DTAA documentation and Form 15CA/15CB preparation.
Q11. What is the late fee for delayed TDS return filing?
Section 234E levies a mandatory fee of Rs.200 per day for each day of delay in filing TDS returns — capped at the total TDS amount for the return. Additionally, if the return is filed more than 1 year late or contains incorrect information, a penalty of up to Rs.1 lakh applies under Section 271H. Unlike most penalties, Section 234E is a mandatory levy — there is no discretion to waive it.
Q12. How does TDS apply to rent paid by individuals?
Individuals and HUFs not subject to tax audit who pay monthly rent above Rs.50,000 must deduct TDS at 2% under Section 194IB (rate reduced from 5% by Finance Act 2024, effective 1 October 2024). TDS is deducted once per financial year (last month) or when tenancy ends, whichever is earlier. Form 26QC is filed, and Form 16C is issued to the landlord.
Q13. What is TDS on dividends and the Finance Act 2025 change?
Since FY 2020-21, dividends are taxable in shareholders' hands. Companies paying dividends must deduct TDS at 10% under Section 194 for residents with valid PAN. Finance Act 2025 raised the threshold from Rs.5,000 to Rs.10,000 per year — small investors receiving annual dividends below Rs.10,000 are no longer subject to TDS deduction from FY 2025-26.
Q14. What is the TDS rate for senior citizens on interest income in FY 2025-26?
Senior citizens (above 60 years) benefit from a raised threshold for TDS on interest from banks, cooperative societies, and post offices under Section 194A — increased from Rs.50,000 to Rs.1,00,000 per year under Finance Act 2025. This means senior citizens earning up to Rs.1 lakh in annual bank interest will not have TDS deducted — a significant practical relief for interest-dependent retirees.
Q15. What is e-TDS and how is a correction filed?
e-TDS refers to electronically filed TDS returns submitted through NSDL/TRACES. Corrections to filed returns are submitted as correction statements on TRACES — addressing PAN errors, challan mismatches, deductee data corrections, or deletion/addition of deductee records. After successful correction, Form 26AS of the affected deductees is updated within 3-7 working days.
Q16. What is TDS under Section 194Q on purchase of goods?
Section 194Q (effective 1 July 2021) requires buyers with annual turnover exceeding Rs.10 crore to deduct TDS at 0.1% on purchases from a single seller exceeding Rs.50 lakh in a financial year. This applies to goods only — not services. If both 194Q (TDS) and 206C(1H) (TCS) apply, only Section 194Q takes precedence and TCS is not collected.
Q17. Can TDS be adjusted against income tax refund?
Yes. TDS deducted and reflected in Form 26AS / AIS is credited against the deductee's income tax liability for the year. If TDS exceeds total tax liability after computing income from all sources, the balance is refunded by the Income Tax Department — typically within 3-6 months of ITR filing through direct credit to the bank account linked with PAN.
Q18. What is Form 26QB and when is it required?
Form 26QB is the challan-cum-return for TDS on immovable property purchase under Section 194IA. It is required when buying property valued at Rs.50 lakh or more. The buyer fills Form 26QB online (IT portal or NSDL), deducts 1% TDS, and deposits within 30 days from month-end of the payment. Each buyer files a separate 26QB per seller for joint transactions. Form 16B (TDS certificate for seller) is downloaded from TRACES after processing.
Q19. How does StartupDost handle TDS for businesses with large pan-India vendor networks?
We maintain a complete vendor master with PAN validation, payment category, applicable TDS sections (or codes under the new Act), rates, and running threshold trackers. Monthly payments are processed with section-wise TDS computation. Bulk challan deposits are made before the 7th. Form 26Q is filed with complete, reconciled deductee data. Quarterly 26AS checks identify any gaps before they escalate.
Q20. What steps must businesses take before 1 April 2026 for Income Tax Act 2025 TDS compliance?
Key actions before 1 April 2026: (1) Update ERP/accounting/payroll software to map old section numbers to new Section 392/393/394. (2) Replace old payment codes with new numeric codes 1001-1092 on challans. (3) Update TDS certificates from Form 16 to Form 130, and Forms 15G/15H to Form 121 for Tax Year 2026-27. (4) Ensure Q4 FY 2025-26 TDS returns are filed under old Act with old section references. StartupDost handles all these transitions for clients automatically.
