TDS for Businesses: Deduction, Deposit, Returns and Form 16

Tax Deducted at Source (TDS) requires a business making certain payments – like salary, rent, professional fees and contractor payments – to deduct tax before paying and deposit it with the government. It is one of the most important recurring compliances for any business with staff or vendors.

Note: the Income-tax Act, 2025 has replaced the Income-tax Act, 1961 from 1 April 2026. Section numbers have changed, but the concepts explained here continue. Always check the provisions that apply to your financial year.

Common payments covered by TDS

• Salaries to employees
• Payments to contractors and sub-contractors
• Professional and technical fees
• Rent for land, buildings, plant and machinery
• Commission and brokerage
• Interest (other than certain exempt interest)
• Payments to non-residents

Each category has its own rate and threshold, which are revised from time to time.

Step 1: Get a TAN

Every deductor needs a Tax Deduction and Collection Account Number (TAN). Companies usually receive it at incorporation; others apply separately.

Step 2: Deduct and deposit

Tax is deducted at the time of payment or credit, whichever is earlier. It must be deposited by the 7th of the following month (with a later date for March).

Step 3: File quarterly TDS returns

Step 4: Issue TDS certificates

• Form 16 – annual certificate to employees for salary TDS.
• Form 16A – quarterly certificate for non-salary TDS.

Consequences of default

• Interest for late deduction and late deposit.
• Late filing fee for each day of delay in filing returns, plus possible penalties.
• Disallowance of part of the expense in computing business income.

Stay compliant with our TDS return filing and TDS compliance services.

Why Choose Vaidam Consultancy?

Our team of chartered accountants, company secretaries and legal professionals handles the paperwork so you can focus on growing your business.

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Frequently Asked Questions

Q1. What is the due date for depositing TDS?

Generally the 7th of the next month, with a later date for tax deducted in March.

Q2. Is TAN different from PAN?

Yes. TAN is used for deducting and depositing tax; PAN is your income tax identity.

Q3. Can a TDS return be corrected?

Yes. A correction statement can be filed to fix errors.

Q4. What happens if TDS is not deducted?

Interest, penalties and disallowance of the expense can follow.