TDS & Compliance
Quarterly TDS returns across all forms, TRACES-based Form 16 and 16A generation, TDS correction returns to fix mismatches, lower/nil TDS certificate applications under Sec 197/195, and Form 16B for property buyers. End-to-end TDS compliance — CA-managed, deadline-tracked, TRACES-compliant.
TDS & Compliance
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TDS Non-Compliance — Penalties & Interest
₹200/Day Has No Upper Cap — It Keeps Running
Many businesses discover the 234E late fee only when TRACES generates a demand notice for accumulated fees. A single quarter's TDS return filed 100 days late attracts a ₹20,000 late fee on top of any outstanding interest. With 4 quarters and multiple return types (24Q + 26Q), late filings compound rapidly. TaxClue's quarterly TDS compliance service ensures every return is filed before the due date — the ₹200/day clock never starts.
TDS Return Filing Schedule
| Quarter | Period | TDS Deposit Last Date | Return Due Date (24Q/26Q) | Return Due Date (27Q/27EQ) |
|---|---|---|---|---|
| Q1 | April – June | 7th of following month | 31 July | 31 July |
| Q2 | July – September | 7th of following month | 31 October | 31 October |
| Q3 | October – December | 7th of following month | 31 January | 31 January |
| Q4 | January – March | 30 April (March TDS) | 31 May | 31 May |
The Four TDS Return Forms Explained
Common TDS Sections, Thresholds & Rates
| Section | Payment Type | Threshold | TDS Rate | Who Deducts |
|---|---|---|---|---|
| 194C | Contractors / sub-contractors | ₹30K single / ₹1L aggregate | 1% (Indiv) / 2% (Others) | Any person paying |
| 194J(a) | Technical services / royalty | ₹30,000 per year | 2% | Any person paying |
| 194J(b) | Professional fees / directors | ₹30,000 per year | 10% | Any person paying |
| 194I(a) | Rent — plant, machinery, equipment | ₹2.4 lakh per year | 2% | Any person paying |
| 194I(b) | Rent — land, building, furniture | ₹2.4 lakh per year | 10% | Any person paying |
| 194A | Interest other than securities (bank FD) | ₹40,000 (₹50K senior) | 10% | Banks, NBFCs, companies |
| 194H | Commission / brokerage | ₹15,000 per year | 5% | Any person paying |
| 194O | E-commerce operator to participant | ₹5 lakh per year | 1% | E-commerce operators |
| 194Q | Purchase of goods (buyer's TDS) | ₹50 lakh per seller per year | 0.1% | Buyers with turnover >₹10 Cr |
| 194IA | Purchase of immovable property | ₹50 lakh | 1% | Property buyer (no TAN needed) |
| 195 | Payments to NRI (Sec 195) | Any payment exceeding tax treaty threshold | DTAA rate or 30%+ as applicable | Any person paying NRI |
TDS Return Filing — 24Q / 26Q / 27Q / 27EQ
📋 Data Collection & Challan Reconciliation
- ✓Collect payment register — all TDS-liable payments made during the quarter
- ✓Collect all TDS deposit challans (BSR code, challan serial number, amount, date)
- ✓Match challan amounts to deductee-wise TDS — section-wise breakup
- ✓Identify any short deduction or short deposit from prior quarters
- ✓Verify PAN of each deductee — invalid PANs trigger 20% TDS rate
- ✓Return cannot be filed if challans are undeposited — deposit must precede filing
📊 Return Preparation & TRACES Filing
- ✓Prepare return in FVU (File Validation Utility) format approved by TIN
- ✓Generate .fvu file and upload to TRACES portal under deductor's TAN
- ✓File all applicable forms for the quarter (24Q + 26Q for most entities)
- ✓Obtain Provisional Receipt Number (PRN) — filing acknowledgement
- ✓Nil return filed for quarters with no TDS-liable payments
- ✓PRN shared with client; return status tracked to "Accepted" on TRACES
TDS Correction Return
| Error Type | Correction Type | When It Causes Problems |
|---|---|---|
| Wrong challan BSR code or serial number | C2 — Challan correction | Challan unmatched on TRACES — full quarter's TDS credit fails for all deductees under that challan |
| Wrong deductee PAN | C3 — Deductee correction | TDS credit appears against wrong person's 26AS — correct person gets nothing, wrong person gets phantom credit |
| Wrong TDS amount for a deductee | C3 — Deductee correction | Short credit causes demand notice on the deductee; excess credit causes refund confusion |
| Wrong TDS section code | C3 — Deductee correction | Wrong section code may change applicable rate — can trigger compliance notice or demand |
| Adding a missed deductee | C4 — Addition of deductee | Deductee never appears in TRACES — cannot claim any TDS credit at all |
| Deleting incorrectly added deductee | C4 — Deletion | Phantom TDS credit entry causes confusion in TRACES matching |
| Wrong deductor details (TAN/name) | C1 — Deductor correction | Return attributed to wrong TAN — credit mismatch for all deductees in that return |
Wrong PAN in TDS Return — The Most Common & Most Damaging Error
If a vendor or employee's PAN was entered incorrectly in the TDS return, the TDS credit goes against the wrong PAN on TRACES. The correct person's Form 26AS shows nothing — and when they file their ITR, they cannot claim credit for TDS you deducted. This frequently leads to: notices to the deductee for unpaid tax, disputes between employer and employee, and demands on the deductor for non-compliance. TaxClue verifies all PANs against the Income Tax PAN database before filing every TDS return — and files correction returns promptly whenever a mismatch is discovered.
Form 16 & Form 16A Issuance
📄 Form 16 — Salary TDS Certificate
- ›Issued by: Every employer who deducted TDS on salary under 24Q
- ›Issued to: Each employee whose TDS was deducted during the financial year
- ›Due date: 15 June after the end of the financial year
- ›Part A: Downloaded from TRACES — contains employer PAN, employee PAN, quarterly TDS summary, challan details
- ›Part B: Prepared by employer — contains gross salary, HRA, LTA, deductions (80C, 80D), net taxable salary, tax computation
📄 Form 16A — Non-Salary TDS Certificate
- ›Issued by: Any deductor who deducted TDS on non-salary payments under 26Q
- ›Issued to: Each deductee (vendor, contractor, consultant)
- ›Due date: 15 days from TDS return due date for each quarter
- ›Source: Entirely downloaded from TRACES — no manual preparation like Form 16 Part B
- ›Used for: Deductee uses Form 16A to claim TDS credit while filing ITR
Form 16 Part A Cannot Be Self-Prepared — It Must Come from TRACES
This is one of the most persistent compliance errors. Many small employers prepare their own "Form 16" using Excel or a payroll software template — but Part A of Form 16 is mandatory to download from TRACES using the deductor's TAN login. A self-prepared Form 16 Part A is invalid and not accepted for ITR filing. Employees who receive self-prepared Form 16s often face mismatches at AIS/26AS reconciliation when filing their ITR. TaxClue always downloads Form 16 Part A directly from TRACES — it is never self-generated.
Lower / Nil TDS Certificate Application
When TDS deducted at the standard rate significantly exceeds your actual tax liability — and you have to wait until filing your ITR to get a refund — a lower or nil TDS certificate stops the over-deduction at source. No waiting for refund. Cash flow freed immediately.
📜 Section 197 — Resident Taxpayers
- ›Application made to the Assessing Officer (AO) having jurisdiction over the applicant's PAN
- ›Certificate issued specifying a lower rate or nil TDS — valid for the financial year it is issued
- ›Certificate holder gives a copy to each payer (deductor) before making the payment
- ›Deductor deducts TDS at the reduced rate specified in the certificate — not at standard rate
- ›Applicable sections: 192, 193, 194, 194A, 194C, 194D, 194G, 194H, 194I, 194J, 194K, 194LA, 194LBA, 195
- ›Certificate must be renewed each financial year — it does not carry forward automatically
🌍 Section 195(3) — NRI / Foreign Payments
- ›NRI or foreign company receiving payments from India can apply under Sec 195(3) for nil TDS certificate
- ›Payer (Indian entity) can also apply under Sec 195(2) for determination of correct TDS amount on a specific remittance
- ›DTAA (Double Tax Avoidance Agreement) provisions may enable lower rate — TaxClue analyses the applicable treaty
- ›Form 13 is the application form for both Sec 197 and Sec 195 lower TDS certificates
- ›TRACES online system (AATS) used for Form 13 filing
- ›Application must be made before payments begin — certificate cannot operate retrospectively
Form 16B — Property Buyer TDS Certificate
When you buy property (other than agricultural land) with consideration above ₹50 lakh, you must deduct 1% TDS from the payment to the seller, deposit it via Form 26QB, and issue Form 16B to the seller. No TAN required for this — it is filed using the buyer's PAN.
Verify Seller's Residency Status
The TDS rate and form differ based on whether the seller is a resident Indian or NRI. For residents: Sec 194IA at 1% via Form 26QB. For NRIs: Sec 195 at much higher rates — the buyer may need a CA certificate in Form 15CB and file Form 15CA.
Calculate TDS Amount Per Transaction
TDS at 1% is calculated on the consideration amount — not on the registered value. If there are multiple buyers or sellers, TDS applies on each buyer's share. If payment is in instalments, TDS must be deducted on each instalment.
File Form 26QB & Deposit TDS
Form 26QB filed on the Income Tax portal (no TAN required). Details required: buyer PAN, seller PAN, property address, total consideration, instalment amount, TDS amount. Payment made online via net banking. TDS must be deposited within 30 days from the end of the month in which TDS was deducted.
Download Form 16B from TRACES & Issue to Seller
After 26QB is processed (5-10 working days), Form 16B becomes available for download on TRACES under the buyer's PAN login. The buyer must issue Form 16B to the seller within 15 days of the 26QB due date. TaxClue downloads and delivers Form 16B — and advises the seller on using it to claim TDS credit in their ITR.
Frequently Asked Questions
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End-to-End TDS Compliance — Zero Missed Deadlines
₹200/day late fees, 1.5% monthly interest, and 30% expense disallowance are all avoidable. TaxClue manages every quarterly return, every certificate, and every correction — so none of these penalties ever apply to you.
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