How to make TDS payments in India

Tax Deducted at Source (TDS) is a key mechanism under India’s income tax system to ensure timely tax collection. If you’re a business owner, accountant, or employer, understanding how to make TDS payments in India is essential to stay compliant and avoid penalties.

This article walks you through the entire TDS payment process, from deduction to payment and compliance, in a clear and practical way.

What is TDS and who needs to pay it?

TDS (Tax Deducted at Source) is a tax deducted by the payer at the time of making certain payments such as salary, rent, professional fees, interest, or commission, and deposited with the government on behalf of the payee under the Income Tax Act, 1961.

You are required to deduct and pay TDS if you are:

• A business or professional making specified payments

• An employer paying salaries

• A company, firm, LLP, or individual covered under TDS provisions

TDS applies across a wide range of transactions, and the rate depends on the nature of payment and the applicable section of the Income Tax Act. Once deducted, the tax must be deposited with the Central Government within the prescribed timeline.

Step 1: Deduct TDS at the time of payment or credit

TDS must be deducted in one of two ways depending on which is earlier:

• At the time of credit to the payee’s account

• At the time of payment

The rate of TDS depends on:

• Nature of payment (salary, rent, professional fees, etc.)

• Applicable section of the Income Tax Act

• PAN availability of the deductee

Failure to deduct TDS correctly can attract interest and penalties.

Step 2: Determine the correct TDS section and challan

Before making the payment, identify:

• The correct TDS section (e.g., 192, 194J, 194C)

• The appropriate challan type

Common TDS Challans 

• Challan ITNS 281 – For TDS on non-salary and salary payments

• Challan ITNS 282 – For payment of income tax (other than companies)

• Challan ITNS 283 – For TCS (Tax Collected at Source)

Most TDS payments are made using Challan ITNS 281.

Note: Equalisation Levy is paid using a separate challan on the income tax e-payment portal.

Step 3: Make TDS payment online or offline

There are two main ways to deposit TDS in India:

Electronic (e-payment) mode 

TDS payments are primarily made online through the Income Tax e-payment system. This mode is mandatory for all corporate entities and taxpayers whose accounts are required to be audited and is applicable to most deductors under current rules.. It is fast, traceable, and integrated with the income tax portal.

Online TDS payment process

1. Select Challan ITNS 281

2. Choose:

• Tax applicable (TDS or TCS)

• Type of payment (company or non-company)

3. Enter details such as:

• TAN

• Assessment year

• Nature of payment

• Amount of TDS

4. Choose net banking or debit card

5. Complete the payment

Once successful, a Challan Identification Number (CIN) is generated, which includes:

• BSR code

• Date of deposit

• Challan serial number

This CIN is crucial for returns, reconciliation, and future reference.

Physical mode (Challan 281) 

In limited cases, individuals and certain small businesses may deposit TDS by submitting Challan ITNS 281 at authorised bank branches. However, online payment is mandatory for most deductors, and offline payment is permitted only in exceptional circumstances as prescribed under the Income Tax Rules.

Step 4: Check TDS payment due dates

Timely payment of TDS is critical to avoid interest, penalties, and prosecution in extreme cases.

Timely payment of TDS is critical to avoid interest, penalties, and prosecution in cases of wilful and prolonged default.

Standard TDS payment due dates 

• For most months: On or before the 7th of the following month

• For March deductions: On or before 30 April

For example:

• TDS deducted in July must be paid by August 7

• TDS deducted in December must be paid by January 7

Special cases and exceptions 

Certain payments follow different timelines:

• TDS on property purchase (Form 26QB)

• TDS on rent by individuals or HUFs (Form 26QC)

In such cases, TDS must generally be deposited within 30 days from the end of the month in which the deduction is made.

Late payment attracts:

• Interest at 1% per month for delay in deduction and 1.5% per month for delay in deposit after deduction

• Possible penalties and prosecution under the Income Tax Act

Step 5: File TDS returns after payment

Paying TDS alone is not enough. You must also file TDS returns quarterly with accurate challan and deductee details.

Common TDS return forms 

• Form 24Q – Salary payments

• Form 26Q – Non-salary payments to residents

• Form 27Q – Payments to non-residents

• Form 27EQ – TCS returns

Quarterly due dates for TDS returns 

• Quarter ending June – 31 July

• Quarter ending September – 31 October

• Quarter ending December – 31 January

• Quarter ending March – 31 May

Returns must include correct CIN details and deductee PAN information.

Step 6: Issue TDS certificates to deductees

After filing returns, deductors must issue TDS certificates to deductees so they can claim credit while filing income tax returns.

• Form 16 – For salary TDS

• Form 16A – For non-salary TDS

Timely issuance builds trust with employees and vendors and avoids compliance issues.

Penalties and consequences of non-compliance

Missing deadlines or filing incorrect returns can result in:

• Interest on late deposit of TDS

• Penalty under Section 234E – ₹200 per day until the return is filed, subject to a maximum of the TDS amount

• Penalty under Section 271H – Up to ₹1 lakh for inaccurate or delayed returns

• In severe cases, prosecution under Section 276B

Staying compliant avoids unnecessary costs and prevents issues for deductees whose TDS credits may get delayed.

Common mistakes to avoid while making TDS payments

• Using the wrong TDS section or challan

• Entering incorrect TAN or assessment year

• Missing payment deadlines

• Not reconciling challans with returns

• Failing to issue TDS certificates

Even small errors can lead to notices and compliance issues.

Why TDS matters for your business

Proper TDS compliance helps you manage your finances better by:

• Planning cash flows more accurately with regular and predictable tax payments

• Keeping vendor and employee records accurate through correct reflection in Form 26AS

• Building trust and maintaining compliance by issuing Form 16 and Form 16A on time

How accounting software simplifies TDS payments

Manual TDS management can be time-consuming and error-prone. Modern accounting software helps by:

• Automatically calculating TDS

• Tracking threshold limits

• Generating challans and reports

• Ensuring timely compliance

With comprehensive platforms like Zoho Books, businesses can manage TDS deductions, payments, and returns seamlessly to reduce errors, stay compliant, and save time.

Frequently asked questions

When should TDS be paid to the government?
TDS must be paid by the 7th of the following month, except for March deductions, which are due by 30 April.

Is it mandatory to pay TDS online?
Yes, most deductors, especially companies and audited taxpayers, are required to pay TDS online through authorised banks.

What happens if TDS is not paid on time?
Late payment attracts interest, daily penalties, and in serious cases, prosecution under the Income Tax Act.

Can TDS be paid without a TAN?
No, a valid Tax Deduction and Collection Account Number (TAN) is mandatory to deposit TDS.

Conclusion

Making TDS payments in India involves more than just deducting tax. It requires accurate calculation, timely deposit, correct return filing, and proper documentation. By understanding the end-to-end process and using the right tools, businesses can stay compliant, avoid penalties, and maintain smooth relationships with employees and vendors.

A structured approach to TDS compliance not only saves time but also strengthens your financial governance and credibility with tax authorities.