TDS Return Filing

If you deduct tax at source — on salaries, professional fees, rent, contractor payments, interest or commission — you must deposit it with the government and then report it quarterly in a TDS return. The return is what tells the department which deductee should get credit for which rupee.

Which form you file depends on what you paid. Form 24Q covers salaries, 26Q covers most non-salary payments to residents, 27Q covers payments to non-residents, and 27EQ covers tax collected at source. A business with employees and vendors typically files 24Q and 26Q every quarter.

The return matters more than the payment. If the deposit is made but the return is not filed, your deductees cannot see the credit in their Form 26AS and will come after you for it — while a late fee of ₹200 per day accrues against you.

The ₹200 a day fee is not a penalty you can argue about

Section 234E imposes a fee of ₹200 for every day a TDS return is late. It is a fee, not a penalty, so there is no reasonable-cause defence. It is capped at the amount of TDS in the return — which sounds like relief until you realise a small return can hit its cap in a matter of weeks.

And there is a separate penalty on top

Section 271H allows a penalty between ₹10,000 and ₹1,00,000 for failing to file or for filing incorrect particulars. It is not levied automatically, but it is available to the assessing officer where returns are chronically late or wrong.

Interest runs at two different rates

Tax deducted late attracts interest at 1% per month from the date it should have been deducted. Tax deducted but deposited late attracts 1.5% per month from the date of deduction. The distinction matters, and paying the wrong one leaves a residual default.

No PAN means 20%

Section 206AA requires deduction at 20%, or the applicable rate if higher, where the deductee has not furnished a valid PAN. Deducting at the normal rate and reporting a blank or invalid PAN creates a short-deduction default for the difference — recoverable from you, not from the vendor.

Read the justification report, not just the intimation

When a return is processed, TRACES issues an intimation with a demand figure. The justification report behind it explains line by line what caused it. A large share of demands are PAN errors or challan mismatches that dissolve on correction, rather than tax genuinely owed. Paying the demand without reading the report is how businesses pay tax twice.

Returns are filed against your TAN through the Income Tax Department systems, with certificates and justification reports available on TRACES.

Issue certificates on time. Form 16A within fifteen days of the return due date, Form 16 by 15 June. Vendors and employees who cannot see credit in their 26AS will chase you during their own filing season, and the fix is slower than the prevention.

Reconcile your books to Form 26AS and the TDS returns at least once a year, ideally before the audit. Differences between what you expensed, what you deducted and what you reported are a standard scrutiny trigger, and they are much easier to explain in July than in a notice two years later.

Watch the thresholds. Section 194Q applies to buyers with turnover above ₹10 crore purchasing goods above ₹50 lakh from a single seller, and it interacts with the seller’s TCS obligation under 206C(1H). Getting the interaction wrong means either double collection or none.