TDS FAQs

Question 1

What is TDS (Tax Deducted at Source)?

Accepted Answer

TDS is a mechanism under the Income Tax Act, 1961, where the payer deducts tax at the time of making certain specified payments — salaries, contractor fees, rent, interest, professional fees, and so on — and deposits it with the government on behalf of the payee. It is a pay-as-you-earn system: instead of the recipient paying tax at the year-end, the government collects it upfront at each transaction.

Question 2

Who is responsible for deducting TDS?

Accepted Answer

The deductor is the person or entity making the payment. For business payments (contractor, rent, professional fees, etc.), any person whose books of accounts are subject to audit under section 44AB is a deductor. Individuals and HUFs not liable to audit are generally exempt — except under section 194-IB (rent above ₹50,000/month paid by individuals) and section 194M (contract/professional payments above ₹50 lakh). Companies must always deduct TDS. The deductor must hold a TAN (Tax Deduction and Collection Account Number) before deducting.

Question 3

What is the section 194Q threshold and who does it apply to?

Accepted Answer

Section 194Q applies to a buyer whose total turnover or gross receipts in the immediately preceding financial year exceeded ₹10 crore. Such a buyer must deduct TDS at 0.1 % on any purchase of goods from a single seller once cumulative purchases from that seller in a financial year exceed ₹50 lakh. The threshold is on the seller relationship, not per invoice. Note: if TCS under section 206C(1H) is already being collected by the seller, section 194Q does not apply to avoid double deduction.

Question 4

How do I pay TDS to the government?

Accepted Answer

TDS must be deposited using Challan ITNS 281 on the NSDL / TIN 2.0 portal (tin-nsdl.com) or via net banking. The due date is the 7th of the following month for TDS deducted in that month (except March — deadline is 30 April). Failure to deposit on time attracts interest under section 201(1A) at 1.5 % per month from the date of deduction to the date of actual payment. After depositing, file the quarterly TDS return (Form 26Q for non-salary, 24Q for salary, 27Q for non-residents) by the 31st of the month following the quarter.

Question 5

What is Form 16A and when is it issued?

Accepted Answer

Form 16A is a TDS certificate issued by the deductor to the deductee for non-salary payments — contractor, professional fees, rent, interest, etc. It shows the amount paid, TDS deducted, and the challan details under which it was deposited. Deductors must issue Form 16A within 15 days of the due date for filing the quarterly return. The deductee uses it to claim credit when filing their ITR; the TRACES-generated Form 26AS / AIS already reflects the same data.

Question 6

What is TDS on rent under section 194I?

Accepted Answer

Section 194I applies when a person (other than an individual or HUF not liable to audit) pays rent of more than ₹6,00,000 in a financial year (₹50,000 per month — raised in Budget 2025 from ₹2,40,000 per year). The TDS rate is 2 % on plant, machinery, or equipment and 10 % on land, building, or furniture. Rent includes payments for sub-letting, lease, or any other arrangement for use of property. If the landlord provides a lower-deduction certificate (Form 13), the rate drops accordingly.

Question 7

What is TDS on professional or technical fees under section 194J?

Accepted Answer

Section 194J applies to payments for professional services (doctors, lawyers, architects, accountants, engineers), technical services, royalty, and non-compete fees. TDS is deducted at 2 % on fees for technical services and at 10 % on professional fees, royalty, and non-compete payments (with an additional 2 % on fees paid to directors). The annual threshold is ₹50,000 per payee (raised in Budget 2025 from ₹30,000). Call centre operators pay at 2 %.