Why TDS Trips Up More Businesses Than GST Ever Will
Here's an uncomfortable truth: GST mistakes are often caught in routine reconciliation. TDS mistakes tend to get caught by the department — months later, with interest running the whole time. Tax Deducted at Source isn't one compliance event, it's a monthly drumbeat woven into salary runs, contractor payments, rent cheques, and now even routine purchase invoices. Miss a beat and the cost compounds quietly until a notice lands.
If you run a business — not just a finance team — this is the one compliance calendar you should actually pin above your desk.
The Sections That Touch Almost Every Business
You don't need to memorise the whole TDS chapter of the Income-tax Act. You need to know which sections apply to the payments you already make every month. The numbers below are the familiar 1961 Act sections, which govern payments up to FY 2025-26; from tax year 2026-27 the Income-tax Act 2025 applies, with salary TDS in Section 392 and most other payments consolidated in Section 393 — confirm the equivalent for each payment type:
- Section 192 — Salary. Deducted based on each employee's estimated annual tax liability, not a flat rate.
- Section 194C — Contractors. Payments to contractors and sub-contractors for work, including many outsourced services.
- Section 194J — Professional and technical fees. Payments to consultants, lawyers, CAs, and technical service providers.
- Section 194-I — Rent. Rent for land, building, machinery, or equipment.
- Section 194H — Commission or brokerage. Payments to agents, distributors, and referral partners.
- Section 194Q — Purchase of goods. Applies when a buyer whose turnover exceeded ₹10 crore in the preceding year buys goods worth more than ₹50 lakh in aggregate from a resident seller in a year.
The Bigger Shift: The Income-tax Act, 2025
Separately — and this matters more than any single threshold change — the Income-tax Act, 1961 has been replaced by the Income-tax Act, 2025, in force from 1 April 2026 (tax year 2026-27); the 1961 Act continues to govern TDS on payments up to FY 2025-26. The section numbers you've used for years (192, 194C, 194J, and so on) now map to different numbers under the new Act — salary TDS sits in Section 392 and most other payments in Section 393 — even where the underlying obligation stays conceptually the same. Check each mapping against the enacted text and your professional's guidance — this is exactly the kind of detail where a wrong assumption in your accounting software mapping can cascade into every return you file from tax year 2026-27.
The Deadline Pattern You Should Have Memorised
Regardless of which section applies, two due-date rhythms govern almost all TDS compliance:
1. Depositing tax deducted. As a general rule, TDS deducted in a month must be deposited with the government by the 7th of the following month — with March being the one exception, where the deposit deadline typically extends to 30th April. This gives businesses a small cushion at year-end but tightens compliance for every other month.
2. Filing quarterly TDS returns. Beyond depositing the tax, you must file a quarterly TDS return — Form 24Q for salary TDS and Form 26Q for most other payments to residents (contractors, professional fees, rent, commission) for periods up to FY 2025-26, and their replacements Form 138 (salary) and Form 140 (other resident payments) from tax year 2026-27. The statements are due by 31 July, 31 October and 31 January for the first three quarters and by 31 May for the January–March quarter, and this is where TDS certificates (Form 16 for employees and Form 16A for others under the 1961 Act; renumbered under the 2025 Act — confirm the current form) get generated for your payees.
What Happens If You Miss a Date
Two consequences matter most, and business owners consistently underestimate both:
- Late filing fee under Section 234E (Section 427 of the 2025 Act) — a per-day fee for filing your quarterly TDS return after the due date, which keeps accumulating until you file (subject to a cap tied to the TDS amount). This applies even if you've already deposited the tax correctly — filing late is treated as its own default.
- Interest under Section 201(1A) (Section 398(3) of the 2025 Act) — charged on late deposit of TDS, calculated per month or part of a month of delay, separate from any late-filing fee. Depositing even a day late in a new month can trigger a full month's interest.
What This Means for You
If you're a business owner rather than the person doing the filing, here's the practical takeaway: build a recurring internal deadline of the 5th of every month for deposit and flag quarter-end +3 weeks for returns, so your team always has a buffer before the statutory date. Second, don't let your accounting or payroll software auto-apply threshold and section numbers without a periodic review — especially through the transition from FY 2025-26 to tax year 2026-27, when payments straddle the 1961 Act and the Income-tax Act 2025's renumbered sections and forms. A short calendar review with your CA once a quarter is far cheaper than one missed deposit.
This is a general reference, not a substitute for advice on your specific facts — TDS thresholds and section numbers are in a period of genuine change, and the right call depends on your transaction type and timing.