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TDS Compliance India — New IT Act 2025

End-to-end TDS management under the Income Tax Act 2025 — salary TDS under Section 392, vendor and contractor TDS under Section 393, quarterly return filing (Form 138/139), TDS certificates (Form 130/131), TRACES reconciliation, and Lower Deduction Certificates. Handled by our CA team pan-India.

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What We Cover

Our Services

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Payroll TDS — Section 392
Monthly salary TDS computation, Form 122 collection from employees, payroll reconciliation, and issuance of Form 130 (annual TDS certificate replacing Form 16) for all employees.
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Vendor TDS — Section 393(1)
TDS workings on payments to contractors (1%/2%), professional fees (10%/2%), rent (10%/2%), commission, royalties, and all other resident payments under the consolidated Section 393(1) table.
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Non-Resident TDS — Section 393(2)
TDS on payments to non-residents under Section 393(2) (replacing Section 195). DTAA analysis, Form 10F verification, Tax Residency Certificate review, and Form 146/145 (15CB/15CA) for remittances.
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Quarterly Return Filing
Form 138 (resident payments, replacing 24Q/26Q) and Form 139 (non-resident payments, replacing 27Q) filed quarterly on TRACES. FVU validation, submission, and acknowledgement.
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TRACES Reconciliation
Monthly reconciliation of TDS deducted vs Form 26AS credits for all deductees. Identification and correction of mismatches before they generate notices or refund delays.
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Lower Deduction Certificates — Section 395
Application for Lower Deduction Certificates (Form 13) for vendors whose actual tax liability is lower than statutory TDS rates. Significant cash flow benefit for NRI property sellers and high-value contractors.
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TDS Audit & Health Check
Review of TDS compliance for a financial year — identifying deductions at wrong rates, missed payments, TRACES mismatches, and exposure before a tax audit or scrutiny proceeding.
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TDS Default Response
Response to TRACES intimations under Section 398 for TDS defaults — interest computation under Section 201(1A), penalty response, and rectification of returns.
How We Work

Simple Process

01
Setup & Master Data
We collect vendor PAN details, employee data, and set up TDS workings aligned with Section 393 categories.
02
Monthly Deduction & Deposit
TDS computed on each payment category, deposited by 7th of following month via challan. Challan details preserved for return filing.
03
Quarterly Return Filing
Form 138/139 filed within prescribed due dates. TRACES acknowledgement obtained and filed.
04
Certificate Issuance
Form 130 issued to employees; Form 131 to non-salary deductees within prescribed timelines.
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Annual Reconciliation
Year-end reconciliation of all TDS with Form 26AS, AIS, and financial statements for audit readiness.
Common Questions

Frequently Asked Questions

The Income Tax Act 2025 consolidated all 40+ individual TDS sections (192, 193, 194A, 194C, 194J etc.) into a single provision — Section 393. Salary TDS is now under Section 392. All vendor/contractor/professional fee TDS is under Section 393(1). Non-resident TDS is under Section 393(2). Form numbers have also changed — Form 16 is now Form 130, Form 16A is Form 131, 24Q/26Q are now Form 138, and Form 27Q is now Form 139. The rates and thresholds are largely unchanged — only the section numbering and form numbers are new.
TDS must be deposited by the 7th of the month following deduction (for March, the due date is 30 April). Quarterly TDS returns (Form 138) are due on 31 July (Q1), 31 October (Q2), 31 January (Q3), and 31 May (Q4). Quarterly returns for non-residents (Form 139) follow the same schedule. Late deposit attracts interest at 1%/1.5% per month; late filing attracts a penalty of Rs.200 per day under Section 398.
If a resident buyer purchases property from an NRI without deducting TDS at the applicable rate under Section 393(2), the buyer becomes liable as the defaulting deductor under Section 398. The buyer is treated as an assessee in default and becomes liable to pay the TDS amount, plus interest at 1% per month from the date of payment to the date of deduction, and a further 1.5% per month from the date of deduction to the date of deposit. Budget 2026 has removed the TAN requirement for such transactions from 1 October 2026, but the TDS deduction obligation continues.
Form 122 (the new investment declaration replacing the informal declaration) is typically collected once at the beginning of the financial year. However, employees can submit a revised declaration during the year if there is a material change in their investment plans — for example, if they have subscribed to an ELSS fund they had not initially declared. The employer should use the revised declaration for TDS computation for the remaining months of the year.
A Lower Deduction Certificate (LDC) under Section 395 (previously Section 197) instructs the buyer to deduct TDS at a rate lower than the standard statutory rate, based on the NRI seller's actual estimated tax liability. Without an LDC, the buyer must deduct TDS at 12.5% (LTCG) or 30% (STCG) on the full sale consideration — which is typically far more than the actual tax on the capital gain. With an LDC, TDS can be reduced to the actual liability, sometimes as low as 3–5% or nil if the seller reinvests under Section 54. Apply at least 45–60 days before the sale through Form 13 on TRACES.
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Complete Guide

TDS Compliance in India — Rates, Deadlines & Penalties

Tax Deducted at Source (TDS) is a withholding mechanism under the Income Tax Act 2025 (earlier Act 1961) where the payer of specified income must deduct tax at prescribed rates before releasing payment to the recipient. TDS applies to salary (Section 192), interest from banks (Section 194A), rent (Section 194I), professional fees and technical services (Section 194J), contractor payments (Section 194C), e-commerce operator payments (Section 194O), and many other categories. The deductor must obtain a TAN (Tax Deduction Account Number) and deposit TDS by the 7th of the following month (30 April for March deductions).

TDS rate changes under the Finance Act 2024 simplified the TDS framework — notably, TDS on professional fees under Section 194J was bifurcated: 2% for technical services (excluding professional services) and 10% for professional services. From 1 October 2024, TDS on property purchases under Section 194-IA was modified to apply on the higher of sale consideration or stamp duty value if the stamp duty value exceeds 110% of consideration. Businesses must maintain a TDS register tracking deductions, deposits, and Form 26Q/24Q filings.

Consequences of TDS non-compliance are severe: interest of 1% per month for failure to deduct, 1.5% per month for failure to deposit after deduction, disallowance of 30% of expense where TDS was not deducted, penalty under Section 271C equal to the amount of TDS not deducted/deposited, and prosecution under Section 276B with imprisonment of 3 months to 7 years for wilful default. Quarterly TDS returns (Form 26Q, 24Q, 27Q) must be filed within 31 days of the quarter end.

Shahi & Co. provides end-to-end TDS compliance management — TDS calculation, deposit, quarterly return filing, issuance of Form 16/16A to deductees, and Lower Deduction Certificate (Form 13) applications for vendors with lower income or existing losses. Contact us to set up a fully compliant TDS workflow for your business.

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Outsource Your TDS Compliance Today

We handle TDS computation, deposit, returns, and TRACES reconciliation monthly. You focus on your business.

💬 WhatsApp Us ✉ Write to Us
📞 +91-9999 361 351
✉ info@shahiandco.in
📍 Pushp Vihar, New Delhi – 110 062