TDS: the handful of sections a business actually touches
Tax deducted at source feels sprawling because the statute is. In day-to-day operation, most businesses deduct under a small number of provisions, repeatedly, and get into difficulty over process rather than interpretation.
2 min readOadbox
The short list
Salaries are deducted under the salary provision at each employee's own effective rate. Beyond that, the recurring ones are contractor payments, professional and technical fees, commission and brokerage, rent, and — for larger businesses — purchases of goods above a turnover threshold.
Each has its own rate, its own threshold, and a separate treatment where the recipient has not furnished a PAN. Those specifics move with almost every Finance Act, which is why they belong in a table your accountant maintains rather than in anyone's memory.
The process is where money is lost
Interest and fees for late deduction, late deposit and late filing accrue automatically and are not negotiable. They are also entirely avoidable, because the calendar is fixed and known.
- Deduct at the earlier of credit to the account or payment — including provisions at year end.
- Deposit by the monthly due date, with the year-end month treated differently.
- File the quarterly statement even where there is nothing to report, if you have a TAN and are otherwise liable.
- Issue certificates on time — the recipient's own return depends on them.
Year-end provisions are the classic trap
Expenses provided for on the last day of the year, with no invoice and sometimes no identified payee, still attract deduction. Businesses that book the provision and deduct only when the invoice arrives in the new year have deducted late by definition.
The consequence is not only interest. Expenditure on which tax was not deducted correctly can be disallowed, which turns a process slip into a tax cost.
Reconcile your own credit too
You are also a deductee. Tax deducted by your customers appears in your annual tax statement, and mismatches there delay your refunds.
Checking it quarterly rather than at return time gives you a window in which the deductor can still correct their filing. After that, you are asking a customer's accounts team for a favour.
Rates, thresholds and the treatment of missing PAN change regularly. Use this as a map of the obligations and confirm every figure against current law.
Written by the Oadbox team. Something here not match how it works in your business? We would genuinely like to hear it — connect@oadbox.com.