TDS overview
Tax Deducted at Source (TDS)
A complete overview of the TDS mechanism under the Income Tax Act 2025 — who deducts, when, how much, and what happens if you don't.
What is TDS?
Tax Deducted at Source (TDS) is a mechanism where the payer deducts tax at the time of making a payment and deposits it directly with the government on behalf of the payee. It is essentially a pay-as-you-earn system that ensures tax collection at the point of income generation.
Under the Income Tax Act 2025, TDS provisions are consolidated under Chapter XIX-B, with sections renumbered from the 1961 Act. The core principle remains unchanged — the deductor is responsible for correct deduction and timely deposit.
Key Concepts at a Glance
| Term | Meaning |
|---|---|
| Deductor | The person making the payment who is required to deduct TDS |
| Deductee | The person receiving the payment from whom tax is deducted |
| TAN | Tax Deduction Account Number — mandatory for every deductor |
| Form 16/16A | TDS certificate issued by deductor to deductee |
| Form 26AS | Annual tax statement showing all TDS credits against your PAN |
When is TDS Applicable?
TDS is triggered when two conditions are met simultaneously:
- The nature of payment is covered under a TDS section (salary, interest, rent, fees, etc.)
- The payment exceeds the threshold limit specified for that section
If either condition is not met, no TDS is required. Once both conditions are met, TDS applies to the entire amount (not just the amount above the threshold) unless otherwise specified.
Who Must Deduct TDS?
- Companies (Indian & foreign)
- Firms & LLPs
- Government offices
- Individuals/HUF liable for audit
- Trusts & AOPs
- Individuals not subject to audit
- HUF not subject to audit
- (Exception: TDS on rent & property purchase applies to all buyers/payers)
TDS Due Dates
| Nature of Deduction | Due Date for Deposit |
|---|---|
| Government deductor (without challan) | Same day as deduction |
| Government deductor (with challan) | 7th of the following month |
| Non-government — April to February | 7th of the following month |
| Non-government — March | 30th April |
Consequences of Non-Compliance
| Default | Consequence |
|---|---|
| Failure to deduct | Interest @ 1% per month from date tax was deductible |
| Failure to deposit after deduction | Interest @ 1.5% per month from date of deduction to deposit |
| Late filing of TDS return | ₹200 per day (max: total TDS amount) |
| Expense disallowance | 30% of expense disallowed if TDS not deducted/deposited |
TDS Returns — Filing Schedule
| Quarter | Period | Due Date | Form |
|---|---|---|---|
| Q1 | April – June | 31st July | 24Q / 26Q |
| Q2 | July – September | 31st October | 24Q / 26Q |
| Q3 | October – December | 31st January | 24Q / 26Q |
| Q4 | January – March | 31st May | 24Q / 26Q |