Understanding TDS: A Practical Guide for Employers and Freelancers

TDS is one of the most common sources of tax notices. Get clarity on rates, deadlines, Form 26AS reconciliation, and how to handle a TDS mismatch.

Tax Deducted at Source (TDS) is the single largest source of tax notices in India. From salaried employees with Form 16 mismatches to freelancers with unreconciled TDS credits in Form 26AS — TDS errors can snowball into lengthy assessments. Here's a complete practical guide.

Key TDS Rates You Must Know (FY 2024-25)

Section 192 — Salary: As per slab rate (employer deducts based on projected annual income)
Section 194C — Contractor/Subcontractor: 1% (individual/HUF), 2% (others)
Section 194J — Professional/Technical Services: 10% (professionals), 2% (technical services)
Section 194H — Commission/Brokerage: 5%
Section 194I — Rent: 2% (plant/machinery), 10% (land/building)
Section 194Q — Purchase of goods (turnover > ₹10Cr): 0.1%
Section 195 — Payments to non-residents: Varies by DTAA and nature of income

TDS Filing Deadlines — Don't Miss These

TDS deducted in April-February: Deposit by 7th of the following month
TDS deducted in March: Deposit by April 30
Quarterly TDS Returns (24Q/26Q): Q1 by July 31, Q2 by Oct 31, Q3 by Jan 31, Q4 by May 31
Form 16 (salary) issuance: By June 15 of the assessment year
Form 16A (non-salary): Within 15 days of due date of TDS return

⚠️ Important

Late TDS deduction attracts interest at 1% per month. Late deposit attracts 1.5% per month. Late filing of TDS returns attracts ₹200 per day. These compound quickly — don't delay.

Form 26AS: Your Tax Passbook — How to Reconcile

Form 26AS (now replaced by the Annual Information Statement — AIS) is the definitive record of all TDS deducted, advance tax paid, and refunds issued against your PAN. Before filing your ITR, always reconcile:

Download AIS from the Income Tax portal under 'Annual Information Statement'
Match TDS credits with actual certificates received (Form 16, 16A)
If there's a mismatch — contact the deductor first. They may need to revise their TDS return.
Do NOT claim credit for TDS that doesn't appear in AIS — it will create a demand during processing
If the deductor is unresponsive, file a grievance on the TDS portal at tdscpc.gov.in

For Freelancers: Managing 194J TDS

If you are a freelancer or consultant receiving professional fees, clients deduct TDS at 10% under Section 194J. Ensure you collect Form 16A from every client. Freelancers with multiple clients often find that their AIS TDS credits don't match their invoices — keep a TDS tracker spreadsheet.

💡 Pro Tip

If your estimated tax liability for the year is nil (because of lower income or deductions), submit Form 15G/15H to prevent TDS deduction at source. This avoids the refund cycle entirely.