For small businesses, Tax Deducted at Source (TDS) compliance is essential to avoid penalties and ensure smooth financial operations. Understanding when and how to deduct and file TDS can save you from unwanted legal trouble. Let’s break it down in simple terms.
- What is TDS and Who Needs to Deduct It?
TDS is a tax deducted by the payer before making payments such as salaries, professional fees, rent, and contractor payments. Businesses need to deduct TDS if:
- They are a company or LLP or have a turnover exceeding ₹1 crore (for businesses) or ₹50 lakh (for professionals).
- Payments exceed specified limits (e.g., ₹30,000 for professional fees, ₹2.4 lakh for rent).
- Salaries exceed taxable limits, requiring deduction under Section 192.
- Common TDS Rates for Businesses
- Salaries (Sec 192): As per income tax slab rates.
- Professional Services (Sec 194J): 10% (2% for technical services like digital marketing, IT services).
- Rent (Sec 194I): 10% (for land/building), 2% (for machinery).
- Contractor Payments (Sec 194C): 1% (individuals), 2% (companies).
- Commission/Brokerage (Sec 194H): 5%.
- TDS Return Filing and Due Dates
TDS deductions must be deposited monthly and returns filed quarterly:
- Deposit TDS: By the 7th of the following month.
- Quarterly TDS Returns: Due on 31st July, 31st October, 31st January, and 31st May.
- Consequences of Late TDS Filing
- Late Fee: ₹200 per day under Section 234E.
- Interest: 1.5% per month for delayed deposit.
- Disallowance of expenses: If TDS is not deducted or deposited, related expenses may be disallowed, increasing taxable income.
- Simplify Your TDS Compliance
Managing TDS calculations, payments, and return filings can be time-consuming. Want expert assistance with TDS compliance and filings? Let our professionals handle it while you focus on growing your business!
Schedule a Consultation Today!
