What is TDS, and Why It Matters?
Tax Deducted at Source is a crucial component of India’s tax compliance system. It is mandated under the Income Tax Act. TDS ensures that tax is collected at the source of income itself, helping the government maintain a steady revenue flow and curbing tax evasion. Whether you’re a business, professional, or salaried individual, understanding and complying with TDS is essential.
Book A Demo
Who Needs to Deduct TDS in India?
- Companies make specified payments, such as rent, salary, professional fees, and commission.
- Individuals and HUFs are subject to tax audit under Section 44AB.
- Government bodies, local authorities, and certain entities.
- Freelancers and startups if meeting TDS thresholds.
TDS Applicability & Thresholds Across Common Payments
| Payment Type | Section | Threshold (₹) | TDS Rate |
|---|---|---|---|
| Salary | 192 | Applicable as per the slab | Slab Rate |
| Rent of Land/Building | 194I | ₹2.4 lakh/year | 10% |
| Contractor Payment | 194C | ₹30,000/contract or ₹1 lakh/year | 1%-2% |
| Professional Fees | 194J | ₹30,000/year | 10% |
| Commission/Brokerage | 194H | ₹15,000/year | 5% |
| Purchase of Goods (from FY 2021-22) | 194Q | ₹50 lakh/year | 0.1% |
(Note: Rates may vary with PAN/Aadhaar availability)
TDS Compliance Challenges Faced by Indian Businesses
- Risk of penalties due to late payment or filing
- Complicated rate structure and constant changes
- High dependency on accountants or consultants
- Errors in deduction or PAN mismatches
- TDS reconciliation with 26AS/TRACES portal
How BUSY Accounting Software Helps in TDS Management
- Auto calculation of TDS while recording transactions
- Pre-set TDS sections and customizable rules
- TDS return preparation and report generation
- TDS certificate (Form 16A) generation
- Seamless GST and TDS integration for overall compliance