1. MAKING
TDS NOT
SO TEDIOUS
An entrepreneur’s guide to TDS for recurring business transactions
Page 1

2. UNDERSTANDING TDS
First things first, we need to understand TDS and why we do
TDS to avoid making things tedious:
• TDS is actually tax paid in advance for the year against
the expected tax for the year
• It is collected on a premise that one would file return of
income
• TDS is normally done by the buyer and paid to the
government on behalf of the payee
Page 2

3. TRANSACTIONS THAT ATTRACT TDS
Other transactions:
• Interest on Securities
Normal business transactions • Dividends
• Salaries • Winnings from Lotteries or crossword puzzles
• Winnings from Horse Races
• Interest other than Interest on • Insurance Commission
Securities • Payment to Non-resident sportsmen or sports
association
• Payments to Contractors and
• Payment in respect of NSC
Sub-contractors • Payments in respect of Repurchase of units of
• Commission or Brokerage Mutual Funds or UTI
• Commission on Sale of Lottery Tickets
• Rent • Payment of Compensation on acquisition of
• Fees for Professional or certain immovable property
• Other Sums
Technical Services
• Long term capital gain
• Income or Long term capital gain from Foreign
Currency bonds/Global Depository Receipts
• Income of Foreign Institutional Investors from
Securities
Page 3

4. SALARIES
Section 192
Payment Covered Taxable Salary of the employee
Time of deduction At the time of payment only
Maximum amount which can be On any amount which exceeds the basic
paid without tax deduction exemption limit after deductions/exemptions
Rate At an average rate of tax, computed based on
the slab rate for that Previous Year
Exception If PAN is not provided by the employee, the rate of TDS will be
higher of rate in force or 20%
Page 4

5. INTEREST OTHER THAN INTEREST ON
SECURITIES
Section 194A
Payment Covered Amount payable as interest
Time of deduction At the time of payment or at the time of credit,
whichever is earlier
Maximum amount which can be INR 5,000 per annum
paid without tax deduction
Rate 10% - Payee = Resident Non-corporate
20% - Payee = Resident Corporate
Page 5

6. PAYMENTS TO CONTRACTORS AND
SUB-CONTRACTORS
Section 194C
Payment Covered Any amount of consideration payable towards
contracts for work
Time of deduction At the time of payment or at the time of credit,
whichever is earlier
Maximum amount which can be If a single payment exceeds INR 30,000/- or
paid without tax deduction If total aggregate payments exceed INR
75,000/- per annum per contractor
Rate 1% if Payee = Individual/ HUF
2% if Payee = Others
Exception If PAN is not quoted by the employee, the rate of TDS will be
20%
Page 6

7. PAYMENTS TO CONTRACTORS AND
SUB-CONTRACTORS Section 194C
COMMISSION OR BROKERAGE
Section 194H
Payment Covered Amount of commission or brokerage
Time of deduction At the time of payment or at the time of credit,
whichever is earlier
Maximum amount which can be Any amount exceeding INR 5,000
paid without tax deduction
Rate 10%
20% in cases where PANis not quoted by the
deductee
Page 7

8. RENT
Section 194I
Payment Covered Amount payable as Rent
Time of deduction At the time of payment or at the time of credit,
whichever is earlier
Maximum amount which can be INR 180,000 per annum per payee
paid without tax deduction
Land & Building 10% - If payable to an Individual
Rate 20% - If payable to any other person
Plant & Machinery 2% - Rent of Plant & Machinery
Rate
Exception For assesses whose books of accounts are required to be audited
under Section 44AB in the immediately preceding financial year have to
compulsorily do TDS on ALL TRANSACTIONS covered by the list of
transactions above.
Page 8

9. FEES FOR PROFESSIONAL OR TECHNICAL
SERVICES
Section 194J
Payment Covered Amount payable as Professional services, technical
services or Royalty
Time of deduction At the time of payment or at the time of credit,
whichever is earlier
Maximum amount which can be INR 30,000 per annum per payee
paid without tax deduction
Rate 10%
Exception For assesses whose books of accounts are required to be audited
under Section 44AB in the immediately preceding financial year have to
compulsorily do TDS on ALL TRANSACTIONS covered by the list of
transactions above.
Page 9

10. COMMON QUERY
TDS on FEES FOR PROFESSIONAL OR TECHNICAL SERVICES &
PAYMENTS TO CONTRACTORS AND SUB-CONTRACTORS
When Service tax is charged on Amount of consideration by the Payee, should I
make TDS on Invoice amount or the amount exceeding Service tax?
TDS has to be made on the entire amount of the Invoice including Service Tax.
TDS on RENT
When Service tax is charged on Amount of RENT paid to the Payee, should I
make TDS on Invoice amount or the amount exceeding Service tax?
TDS has to be made only on the amount of RENT. Service Tax should not be
included while making TDS..
Page 10

11. CALCULATING TDS
Base Payments for professional fees were made to Mr. A as follows in the month
scenario of January of INR 100,000 will be:
AMOUNT PAYABLE
Fees payable INR 100,000 TDS @ 10%
TO Mr. A
January INR 100,000 INR 10,000 INR 90,000
Special On April 1, 201X, XYZ Ltd. has engaged Mr. X to perform services in the nature
Case of professional services. He has to be paid the following sums:
Fact 1 June INR 10,000
July INR 10,000
August INR 5,000
Action Payments made were as follows:
June INR 10,000
July INR 10,000
August INR 5,000
Page 11

12. CALCULATING TDS
Special On September 1, 201X, XYZ Ltd. Decided to extend further work to Mr. X for
Case which the payment would be:
Fact 1 September INR 10,000
October INR 10,000
November INR 10,000
Action Payments made were as follows in the month of September will be:
Fees payable TDS PAYABLE
Invoice amount INR 10,000 INR 1,000 INR 9,000
TDS Recovered June INR 1,000
July INR 500
August INR 1,000 INR (2,500)
INR 6,500
Page 12

13. WHEN IS THE DUE DATE FOR PAYMENT OF TDS
April
DUE DATE FOR PAYMENT TO THE May
June
July
August 7th of the month immediately following
GOVERNMENT
September the month of payment or credit, whichever is
October earlier (as applicable)
November
December
January
February
Transactions up March 31
to March 30 of the same month
Transactions of May 31
March 31 of the immediately following
Page 13

14. FILING RETURNS OF TDS
Other Other
If you are a Salary payments to a payments to a
Resident Non-Resident
Company
OR
Form 27Q in
Person whose books are required Form 24Q in Form 26Q in
Electronic
to be audited in immediately Electronic Electronic
format
preceding u/s 44AB format format
+
OR + +
Number of Deductees in any Form 27A
Form 27A Form 27A
quarter return of immediately (Quarterly)
preceding year exceed 20
Form 27Q
Any other person Form 24Q Form 26Q
(Quarterly)
Due Date
April – June, July – September, 15 days from last day of each quarter
October – December
Due Date
31 May immediately following
January – March
Page 14

15. CONSEQUENCES OF DEFAULTING ON TDS
DEFAULT EFFECT
The expenditure for which TDS to be deducted
gets DISALLOWED for Income taxes
Non deduction +
Penal interest @1.5% for every month up to date of deduction
The expenditure for which TDS deducted but not paid
Non payment
gets DISALLOWED for Income taxes us 40a
The amount short deducted is
Less deduction
required to be paid along with penalty
Penal interest @1.5% for every month
Late Payment
from date of deduction to the date of payment.
Page 15

16. Disclaimer
The contents of this document are solely for informational purpose. It
does not constitute professional advice or a formal recommendation.
While due care has been taken in preparing this document, the
existence of mistakes and omissions herein is not ruled out. Neither the
author nor Prequate Mindworks and its affiliates accepts any liabilities
for any loss or damage of any kind arising out of any inaccurate or
incomplete information in this document nor for any actions taken in
reliance thereon. No part of this document should be distributed or
copied (except for personal, non‐commercial use).
Page 16

17. Get in touch
Pradyumna Nag Rakesh Bordia Rishabh Pahariya
Director Director Director
+91 988 63 44 590 +91 988 63 87 858 +91 988 68 21 280
nag@prequate.in bordia@prequate.in rishabh@prequate.in
Prequate Consultants Private Limited
11/2, 3 Cross, Wilson Garden
Bangalore – 560 027
+9180 22 22 50 40
Page 17