TDS Compliance — Post-Registration Compliance Guide
Once your TAN (Tax Deduction and Account Number) is active, TDS compliance becomes a recurring quarterly obligation rather than a one-time filing — every deduction, deposit, return, and certificate runs on its own clock, and missing any one of them triggers interest or penalty even when the underlying tax was correctly withheld. Deductors typically need to track four parallel workstreams through the year: deducting tax at the correct rate at the time of payment, depositing it to the government within the statutory window, filing the quarterly statement (Form 24Q for salaries, 26Q for other payments, 27Q for non-resident payments, 27EQ for TCS), and issuing certificates to deductees so they can claim credit. Small businesses and startups that handled their own bookkeeping before crossing the TDS threshold are the most common source of missed deposits, since the obligation often starts mid-year with the first salary or contractor payment above the threshold. This guide sets out the recurring calendar, the practical steps to stay compliant, and the errors that most often trigger notices from the TRACES/CPC-TDS system. Rates, thresholds, and due dates are periodically revised by the CBDT — always cross-check the applicable Finance Act and current circulars before relying on any figure below for a specific filing. Note also that the Income-tax Act, 2025 replaced the Income-tax Act, 1961 with effect from 1 April 2026 and consolidated the erstwhile scattered TDS sections (192, 194A, 194C, 194J, 194Q, and others) into new, renumbered provisions (broadly Section 392 for salary and Section 393 for other payments); this guide retains the older, more widely recognized section numbers for continuity, so confirm the corresponding current section before citing one in a filing, notice response, or professional engagement.
Before you start
- Active TAN certificate issued via the NSDL/Protean (TIN-NSDL) portal and linked to your PAN
- Valid PAN for every deductee (employee, contractor, vendor, or landlord) before the first payment is made
- Accurate, up-to-date bank account and IFSC details registered for online challan payment (OLTAS)
- Access to the TRACES portal (deductor login, upgraded to TRACES 2.0 from 1 April 2026) for return filing, Form 16/16A generation, and default resolution
- An accounting or payroll system capable of tracking deduction-head-wise ledgers by deductee and quarter
- Digital Signature Certificate (DSC) or Aadhaar-based e-verification set up for authenticating quarterly returns
- A working knowledge of applicable TDS provisions (erstwhile Income-tax Act 1961 sections 192, 194A, 194C, 194J, 194Q, 194-IA, etc.) relevant to your payment types — note that Section 206AB was omitted with effect from 1 April 2025 and, from 1 April 2026, TDS provisions are renumbered under the Income-tax Act, 2025, so confirm current section references
- A documented internal calendar of deposit and filing due dates circulated to accounts/payroll staff
Step-by-step
Map Payment Types to Deduction Sections and Rates
Before processing any payment, classify it against the correct section — Section 192 for salaries (slab-based, per the employee's chosen tax regime), 194A for interest, 194C for contractor payments, 194J for professional or technical fees, 194Q for purchase of goods above the prescribed turnover threshold, and 194-IA for property transactions above the notified value.
- Maintain a rate card mapped to each vendor/payment category and review it against the latest Finance Act and CBDT circulars at the start of each financial year, since rates and thresholds are revised periodically.
- Confirm whether the deductee has a valid PAN; payments to deductees without a valid PAN attract a higher deduction rate under Section 206AA. (Section 206AB, which previously imposed a higher rate on income tax return non-filers, was omitted with effect from 1 April 2025 and no longer applies.)
Deduct Tax at the Time of Payment or Credit, Whichever Is Earlier
TDS must be withheld at the earlier of the date the amount is credited to the payee's account or the date it is actually paid — not at the end of the month or quarter. Maintain a separate deductee-wise ledger in your accounting software to avoid under-deduction or duplicate deduction errors.
For salaried employees, recompute the estimated annual TDS whenever there is a mid-year change in salary structure, tax regime declaration, or investment proof submission, so that later quarters aren't left absorbing a large correction.
Deposit the Deducted Tax Within the Statutory Window
For most deductors, tax deducted in a given month must be deposited to the government by the 7th of the following month (with the March deduction generally allowed until April 30). Government deductors follow a same-day/without-challan process in many cases — confirm which category applies to your entity.
Use Challan ITNS 281 through the OLTAS/e-Pay Tax facility and retain the BSR code, challan serial number, and deposit date — these must match exactly with what you report in the quarterly return.
File the Applicable Quarterly TDS Return
File Form 24Q (salary deductions) and/or Form 26Q (other resident payments), 27Q (payments to non-residents), or 27EQ (TCS) through the TRACES-linked filing utility. Under the current framework, quarterly statements are generally due by 31 July (Q1), 31 October (Q2), 31 January (Q3), and 31 May (Q4 — for the quarter ending 31 March).
- Reconcile every challan and deductee row against your ledger before submission; mismatches are the leading cause of processing defaults.
- Even if you deducted nothing in a quarter but hold an active TAN, consider filing a declaration of non-filing to keep your compliance record clean, since a silent gap can itself trigger a query.
Resolve Defaults and Download Consolidated Files
After filing, check the TRACES portal for processing status and any default notice — common triggers include short deduction, short payment, late deduction/payment interest, and PAN errors. Download Form 26AS/AIS-linked data periodically to confirm deductee-side visibility of your deposits.
Where a genuine default is flagged, pay the outstanding interest or short amount and file a correction statement promptly rather than waiting for a follow-up notice, since unresolved defaults compound with additional interest each month.
Issue TDS Certificates to Deductees
Generate Form 16 (Part A and Part B) for salaried employees after the Q4 return is filed and processed, and Form 16A for non-salary deductees after each quarterly return. Certificates should be generated only through the TRACES portal so the figures tie back to what was actually deposited and reported.
Build in a short buffer between filing the return and issuing certificates, since certificate generation on TRACES depends on the return first being processed without defaults.
Run a Quarterly Reconciliation Before Each Filing
Reconcile your internal payroll/accounts ledger against challans deposited and the draft return figures every quarter — check deductee names, PANs, section codes, and amounts line by line. This is the single most effective control for avoiding downstream notices.
Track and Settle Interest for Late Deduction or Late Deposit
Interest for failure to deduct tax at source runs at 1% per month (or part thereof) from the date it was deductible to the date it is actually deducted, under Section 201(1A). Interest for deducting but depositing late runs at 1.5% per month from the date of deduction to the date of actual deposit.
Pay any such interest voluntarily through the challan before or alongside your next filing — self-correction generally limits exposure compared to waiting for the department to raise a demand.
File Correction Statements for Errors in Prior Returns
If a PAN, challan, or amount error surfaces after filing — whether spotted internally or flagged by TRACES — file a correction statement for that quarter rather than waiting for a notice from the Assessing Officer. Proactive correction, done promptly, generally attracts a materially lower penalty exposure than a department-initiated correction.
Handle TDS on Property and High-Value One-Off Transactions Separately
Certain transactions — such as purchase of immovable property above the notified threshold — are reported on a transaction-specific challan-cum-statement (Form 26QB) rather than the regular quarterly return, and carry their own short filing window from the date of payment. Track these separately from your routine quarterly calendar so they aren't missed.
Review Compliance Annually Before the New Financial Year
At the start of each financial year, review whether your deduction thresholds, applicable sections, and vendor PAN/Section 206AA status still hold, since thresholds and rates are periodically revised in the Finance Act and provisions can be omitted or renumbered (as happened with Section 206AB in 2025 and with the broader TDS section renumbering under the Income-tax Act, 2025 from 1 April 2026). Update your rate card and internal due-date calendar accordingly before the first payment cycle of the new year.
Common mistakes to avoid
- Filing the quarterly TDS return after the due date because the monthly challan deposit was mistaken for the return filing deadline.
- Applying outdated deduction rates or thresholds without checking the current Finance Act and CBDT circulars for the financial year.
- Issuing Form 16/16A before the underlying quarterly return has been processed without defaults on TRACES.
- Continuing to apply Section 206AB's non-filer higher-rate deduction after its omission effective 1 April 2025, instead of confirming which older provisions are still current.
- Treating salary TDS as a one-time calculation instead of recomputing it when an employee's regime choice or investment declarations change mid-year.
- Letting challan details (BSR code, serial number, deposit date) drift out of sync with what is reported in the return, causing processing mismatches.
- Waiting for a department notice before correcting a known PAN or amount error instead of filing a voluntary correction statement.
- Forgetting to track one-off transactions like property purchases (Form 26QB) on the separate, shorter filing timeline that applies to them.
Frequently asked questions
What is the due date to file quarterly TDS returns in India?
Under the current framework, quarterly statements (Form 24Q/26Q/27Q/27EQ) are generally due by 31 July for Q1 (April–June), 31 October for Q2 (July–September), 31 January for Q3 (October–December), and 31 May for Q4 (January–March). These are structural due dates under the Income Tax Rules — confirm against the current CBDT notification before relying on them for a specific filing, since extensions are occasionally granted.
By when must I deposit TDS after deducting it?
For most deductors, tax deducted in a calendar month must be deposited to the government by the 7th of the following month, with the deduction made in March generally allowed until 30 April. Government deductors depositing without a challan often follow a same-day process — confirm which rule applies to your entity type.
When should Form 16 and Form 16A be issued?
Form 16 (salary TDS certificate) is issued after the Q4 return for the financial year is filed and processed, typically within about 15 days of the Q4 due date. Form 16A (non-salary TDS certificate) is issued on a quarterly basis, generally within about 15 days of the due date for filing that quarter's return. Exact timelines are set by Rule 31 and can shift with CBDT notifications — verify the current schedule before committing to a date with deductees.
What happens if I deduct TDS but deposit it late?
Late deposit attracts interest under Section 201(1A) at 1.5% per month (or part of a month) from the date of deduction to the date of actual deposit. Separately, a delay or default in filing the quarterly return can attract a fee under Section 234E and, in more serious or repeated cases, a penalty under Section 271H.
What if I fail to deduct TDS at all?
Failure to deduct attracts interest under Section 201(1A) at 1% per month from the date the tax was deductible to the date it is actually deducted, in addition to the deductor being treated as an 'assessee in default' for the shortfall, subject to conditions where the payee has separately paid the tax. Penalty exposure under Section 271C may also apply for continued or wilful non-deduction — this is a materially higher-risk scenario than a late deposit and should be corrected immediately.
Do I need to file a TDS return for a quarter with no deductions?
If your TAN is active but you made no TDS-liable payments in a quarter, you are generally not required to file a regular statement for that quarter, though filing a declaration of non-filing on TRACES is good practice to keep your compliance record clean and avoid an unexplained gap being flagged later.
What is Section 206AB and when does the higher TDS rate apply?
Section 206AB previously required a higher rate of TDS for payments to 'specified persons' — broadly, deductees who had not filed income tax returns for a defined recent period and met other statutory conditions. This provision, along with the parallel TCS provision Section 206CCA, was omitted with effect from 1 April 2025 to reduce compliance burden, so it no longer applies to payments made on or after that date; deductors should apply the standard section-wise rate (subject to Section 206AA for a missing PAN) rather than checking non-filer status.
How is TDS on the purchase of immovable property reported?
TDS on payment for purchase of immovable property above the notified value threshold is reported through Form 26QB, a combined challan-cum-statement, on a per-transaction basis rather than through the routine quarterly return, and carries its own short filing window measured from the date of payment. Track these separately from your standard quarterly calendar.
Can errors in a filed TDS return be corrected later?
Yes. Deductors can file a correction statement for a previously filed quarter to fix PAN errors, challan mismatches, or incorrect amounts. Filing the correction promptly, before the department raises a demand, generally results in lower penalty exposure than waiting for a notice.
Is professional help necessary for ongoing TDS compliance?
Many small and mid-sized deductors manage routine monthly deduction and deposit in-house but engage a CA or compliance provider for quarterly return preparation and reconciliation, since return formats, section codes, and threshold rules change periodically and errors carry compounding interest. Professional fees for this recurring support are typically billed per quarter — confirm current rates with your provider rather than assuming a fixed figure, as they vary by transaction volume and complexity.
What records should I retain for TDS compliance?
Retain deductee-wise ledgers, challan receipts (BSR code, serial number, deposit date), filed returns and acknowledgment numbers, correction statement history, and issued Form 16/16A certificates for at least the statutory record-retention period applicable to tax records, since these are the first documents requested in the event of a TRACES default notice or assessment.
What penalty applies for late filing of the TDS return itself, separate from interest?
A late filing fee under Section 234E accrues at a fixed amount per day of delay, subject to a cap linked to the TDS amount, until the return is filed. Beyond the fee, a discretionary penalty under Section 271H may also apply for late or incorrect returns, particularly where the delay is prolonged or the return contains material errors — official penalty schedules should be confirmed for the relevant assessment year.
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