TDS Compliance for Small Businesses: Deduction, Deposit, Returns and Certificates

Once a business starts paying rent, contractors, consultants and staff, it usually has to deduct tax at source. TDS compliance follows a monthly and quarterly rhythm. This guide explains it.

Note: this article describes the rules under the Income-tax Act, 1961. The Income-tax Act, 2025 applies from 1 April 2026 (tax year 2026-27), with renumbered provisions and updated forms, so check the current position for later periods.

Get a TAN

Before deducting tax, the business needs a Tax Deduction Account Number (TAN). It's quoted on every challan, return and certificate.

When to Deduct

TDS applies to specified payments once they cross thresholds. Common ones for small businesses include:

• Salaries, based on each employee's estimated tax.
• Payments to contractors and sub-contractors.
• Professional and technical fees.
• Rent for premises, plant or machinery.
• Commission and brokerage.
• Interest other than on securities.
• Payments to non-residents.

Tax is deducted at the time of credit or payment, whichever is earlier.

When to Deposit

Tax deducted in a month is deposited by the 7th of the next month. Tax deducted in March is deposited by 30 April.

Quarterly Returns

• Salaries: Form 24Q.
• Other payments to residents: Form 26Q.
• Payments to non-residents: Form 27Q.

TDS returns are generally due by 31 July, 31 October, 31 January and 31 May for the four quarters.

Certificates

• Form 16 to employees, annually, by 15 June.
• Form 16A to other payees, quarterly, within 15 days of the return due date.

What Happens When It Goes Wrong

• Interest for late deduction and a higher rate for late deposit.
• A late fee for every day a return is late.
• Disallowance of the expense in your own tax computation.
• Your vendors and staff not getting credit for tax deducted.

Getting Help

Think Filing handles TDS for small businesses: monthly deductions and deposits, quarterly returns and certificates.