Key takeaways
- From 1 April 2026, most TDS rules are in Section 393 of the Income-tax Act, 2025; rates and limits for common payments continue.
- Common payments needing TDS include contractor payments, professional fees, rent, commission and interest, above set thresholds.
- Tax deducted in a month must be deposited by the 7th of the next month; for March, by 30 April.
- Quarterly TDS statements are due by 31 July, 31 October, 31 January and 31 May.
Tax Deducted at Source (TDS) means you deduct a part of certain payments you make, deposit it with the government on the payee's behalf, and report it. Many small businesses do not realise they have become liable, until a notice arrives. This guide explains TDS for small businesses in plain language.
What changed from April 2026
The Income-tax Act, 2025 applies from 1 April 2026. It brings most TDS provisions into a single section, Section 393, organised in tables. Old section numbers such as 194C (contractors) and 194J (professional fees) now map to entries in these tables. Payments made or credited up to 31 March 2026 follow the old Act. For most common payments, the rates and thresholds are unchanged.
Who must deduct TDS?
- Companies, LLPs and firms must deduct TDS on specified payments.
- Individuals and HUFs in business or profession must deduct on payments such as contract work and professional fees if their accounts were required to be audited in the previous year.
- Other individuals and HUFs have limited obligations, for example on rent above ₹50,000 a month, and on contract or professional payments above ₹50 lakh in a year.
Common payments, rates and thresholds
| Payment | Old section | Threshold | Rate |
|---|---|---|---|
| Contractors and sub-contractors | 194C | ₹30,000 single payment or ₹1 lakh in the year | 1% if payee is an individual or HUF; 2% for others |
| Professional fees | 194J | ₹50,000 in the year | 10% |
| Technical services (not professional), royalty on sale of films and similar | 194J | ₹50,000 in the year | 2% |
| Rent on land, building or furniture | 194-I | ₹50,000 per month or part of a month | 10% |
| Rent on plant and machinery | 194-I | ₹50,000 per month or part of a month | 2% |
| Commission or brokerage | 194H | ₹20,000 in the year | 2% |
| Interest other than on securities (non-bank payer) | 194A | ₹10,000 in the year | 10% |
| Salary | 192 | Above the tax-free level | At slab rates |
If the payee does not provide a valid PAN, TDS is generally deducted at a higher rate. Always check the current rate table before deducting, because special cases apply.
Due dates
| Task | Due date |
|---|---|
| Deposit TDS deducted in April to February | 7th of the following month |
| Deposit TDS deducted in March | 30 April |
| Quarterly TDS statement, April to June | 31 July |
| July to September | 31 October |
| October to December | 31 January |
| January to March | 31 May |
| TDS certificates to payees | Within the prescribed time after filing the statement |
All dates are also in our compliance calendar.
The cost of getting it wrong
- Interest for each month of delay, at a higher rate when tax is deducted but not deposited
- Late fee for each day a TDS statement is filed late, up to the amount of TDS
- Penalty for not filing statements or filing incorrect ones
- Disallowance of part of the expense when computing your taxable profit if TDS was not deducted or deposited
- Unhappy vendors, because they cannot claim the credit if you do not report it
A simple TDS routine
- Get a TAN as soon as TDS applies to you.
- Collect PAN from every vendor, contractor and landlord.
- Check thresholds before each payment, including yearly totals.
- Deduct and deposit by the 7th of the next month.
- File the quarterly statement and issue certificates on time.
Running payroll too? TDS on salary is part of monthly payroll. Our TDS and TCS compliance team handles deductions, deposits, returns and certificates for small businesses. See also advance tax for businesses.
This article explains the general position under the Income-tax Act, 2025 and the earlier Act as on the date shown. TDS rules have many special cases; confirm the current rate and threshold for each payment.
Frequently asked questions
Does a proprietor have to deduct TDS?
A proprietor whose business turnover crossed the tax audit limit in the previous year must deduct TDS on payments like contractor and professional fees. Other individuals have narrower obligations, such as on high rent or large contract and professional payments.
Do I need a TAN to deduct TDS?
Yes. Anyone required to deduct TDS must have a Tax Deduction and Collection Account Number (TAN) and quote it on challans, statements and certificates.
What if the payee has no PAN?
TDS is generally deducted at a higher rate, often 20%, when the payee does not provide a valid PAN.
What happens if I do not deduct TDS?
Interest applies, penalties may be imposed, and part of the expense can be disallowed when computing your taxable profit.