TDS Return Filing in India refers to the quarterly statement that individuals or entities (called “deductors”) who have deducted Tax Deducted at Source (TDS) from certain payments, must file with the Income Tax Department. This return provides a summary of all TDS-related transactions made during a specific quarter.
What is TDS?
TDS (Tax Deducted at Source) is a system where a person or entity (the “deductor”) who is liable to make certain payments (like salary, rent, professional fees, commission, interest, etc.) to another person (the “deductee”) is required to deduct a certain percentage of tax at the time of making such payment. The deducted amount is then deposited with the government on behalf of the deductee. The deductee later gets credit for this TDS when filing their own income tax return.
Why is TDS Return Filing Important?
Compliance
It’s a mandatory legal requirement under the Income Tax Act, 1961.
Information Sharing
It provides the Income Tax Department with details of TDS deducted and deposited, which is crucial for tracking tax compliance.
Credit to Deductee
The information filed in the TDS return is reflected in the deductee’s Form 26AS (Annual Tax Statement), allowing them to claim credit for the tax already deducted.
Avoid Penalties
Timely and accurate filing helps avoid late filing fees, penalties, and interest.
Who is Required to File TDS Returns?
Generally, any person or entity (other than an individual or HUF whose accounts are not subject to audit under Section 44AB) who is required to deduct TDS under the Income Tax Act must file TDS returns. This includes:
- Companies
- Partnership Firms
- LLPs
- Government offices
- Individuals/HUFs whose books of accounts are required to be audited under Section 44AB (due to turnover exceeding certain limits).
Types of TDS Return Forms
Different forms are prescribed for filing TDS returns based on the nature of the payment from which TDS was deducted:
Form 24Q
For TDS on salaries paid to resident employees (under Section 192). It’s a quarterly statement detailing salary paid and TDS deducted. The fourth-quarter return requires comprehensive salary details for the entire financial year.
Form 26Q
For TDS on payments other than salaries made to resident Indians. This includes payments like interest, commission, professional fees, rent, etc. It’s filed quarterly.
Form 27Q
For TDS on payments made to Non-Resident Indians (NRIs) and foreign companies (e.g., interest, dividends, royalties, technical fees). It’s filed quarterly.
Form 26QB
A challan-cum-statement for reporting TDS on purchase of immovable property (under Section 194-IA). The buyer deducts 1% TDS on property transactions exceeding ₹50 lakhs. This is filed within 30 days from the end of the month in which TDS was deducted. No separate return is required.
Form 26QC
A challan-cum-statement for reporting TDS on rent payments exceeding ₹50,000 per month by individuals or HUFs not subject to tax audit (under Section 194-IB). The deductor deducts 5% TDS. This is filed within 30 days from the end of the month in which TDS was deducted. No separate return is required.
Form 27EQ: For Tax Collected at Source (TCS)
This is applicable to sellers who collect tax at source on specified goods and services (under Section 206C). It’s filed quarterly.
Due Dates for TDS Return Filing
TDS returns are filed on a quarterly basis. The general due dates are:
TDS Payment Due Dates
The TDS deducted must be deposited to the government monthly, generally by the 7th of the following month. However, for TDS deducted in March, the due date is April 30th. (For government deductors, the due date for March is April 7th).
Process of Filing TDS Return
Obtain TAN (Tax Deduction and Collection Account Number)
This is a 10-digit alphanumeric number mandatory for all persons liable to deduct or collect tax at source.
Deduct TDS
Deduct TDS at the prescribed rates as per the Income Tax Act.
Deposit TDS
Deposit the deducted TDS to the government using Challan ITNS 281 within the stipulated monthly due dates.
Prepare TDS Statement
- Use the Return Preparation Utility (RPU) provided by NSDL (now Protean eGov Technologies Limited) or other third-party software.Enter all necessary details, including TAN, PAN of the deductee, nature of payment, amount paid, TDS deducted, challan details, etc.
- Validate the file using the File Validation Utility (FVU) to check for errors.
File the TDS Return
- Online (e-filing): Mandatory for all corporate deductors and other deductors whose accounts are subject to audit under Section 44AB. This is done through the Income Tax e-filing portal (www.incometax.gov.in) using your TAN login. You will need a Digital Signature Certificate (DSC) or Electronic Verification Code (EVC) for verification.
- Offline: Non-corporate and non-audited deductors can file returns physically at TIN-FC (TIN Facilitation Centres).
Generate and Issue TDS Certificates
After filing the TDS return and processing by the department, deductors must issue TDS certificates (Form 16 for salary, Form 16A for non-salary payments) to the deductees within prescribed due dates.
Penalties for Non-Compliance
Non-compliance with TDS provisions can lead to significant penalties:
Late Filing Fee (Section 234E)
A late fee of ₹200 per day for each day of delay in furnishing the TDS/TCS statement from the due date until the return is filed. The total fee cannot exceed the total TDS/TCS amount.
Penalty for Non-Filing or Incorrect Filing (Section 271H)
A penalty ranging from ₹10,000 to ₹1,00,000 can be levied if the deductor fails to file the TDS/TCS statement within one year from the due date, or furnishes incorrect information in the statement (e.g., wrong PAN, challan details, TDS amount).
- Note on recent changes: From April 1, 2025 (i.e., for FY 2025-26 onwards), the penalty-free period for filing TDS/TCS returns will be reduced from 1 year to 1 month.
Interest on Late Deduction/Deposit (Section 201(1A))
- Failure to deduct TDS: Interest at 1% per month from the date on which tax was deductible to the date it is actually deducted.
- Failure to deposit TDS after deduction: Interest at 1.5% per month from the date of deduction to the actual date of deposit. (Even a part of a month is considered a full month for interest calculation).
Penalty for Non-Deduction/Non-Payment (Section 271C)
If a person fails to deduct the whole or any part of the tax or fails to pay the tax after deduction, a penalty equal to the amount of tax not deducted or not paid may be imposed.
Prosecution (Section 276B)
If the deductor fails to deposit the TDS with the government after deducting it, they may face rigorous imprisonment for a minimum of 3 months, which can extend to 7 years, along with a fine.
Given the complexities and severe penalties, it’s highly advisable for employers to seek assistance from Taxation Portal that automates TDS compliance to ensure timely and accurate filings.