How TDS works, in one paragraph
When you pay certain kinds of expense, you withhold a percentage and pay it to the government on the payee's behalf. They claim credit for it against their own tax. Your obligations are three: deduct correctly, deposit on time, and report it so the payee can actually claim it.
Not deducting is worse than deducting wrongly. A deduction missed can disallow the entire expense in your own assessment — which costs far more than the deduction would have.
The sections you will actually meet
| Section | Payment | Typically applies when |
|---|---|---|
| 194C | Contractors | Works contracts, job work, transport — different rate for individuals versus companies |
| 194J | Professional / technical fees | Consultants, auditors, legal, technical services |
| 194I | Rent | Premises versus plant and machinery attract different rates |
| 194H | Commission or brokerage | Agents and intermediaries |
| 194A | Interest (non-securities) | Loans other than from banks |
| 194Q | Purchase of goods | Large buyers above a turnover threshold — interacts with TCS 206C(1H) |
| 192 | Salary | Computed on estimated annual liability, not a flat rate |
Rates and thresholds are not reproduced here on purpose. They move with each finance act, and a stale table in a blog post is how firms deduct the wrong amount with complete confidence. Check the current year's rates, or use a calculator that is maintained.
Thresholds: two numbers, not one
Most sections carry both a single-payment threshold and an annual aggregate. Crossing either triggers deduction — and the aggregate is the one firms miss, because no single invoice looks big enough to notice.
The practical consequence: thresholds must be tracked per deductee across the year, not judged invoice by invoice.
The five that cost the most
- Missing the aggregate threshold. Twelve small invoices to one vendor cross it; no single one looks like it should.
- Wrong section. 194C versus 194J on the same vendor is a genuinely common error, and the rates differ.
- No PAN. Deduction jumps to a much higher rate. Collect PAN at onboarding, not at deduction.
- Late deposit. Interest runs per month or part month — a day late is a month's interest.
- Return filed, certificate never issued. The deductee cannot claim, and you will hear about it.
The quarterly rhythm
- Deduct at credit or payment, whichever is earlier — not when you get round to it.
- Deposit by the due date for the month of deduction.
- File the quarterly statement.
- Issue certificates so deductees can claim.
Firms that decide sections at quarter-end spend the last week reconstructing which payments attracted what. Firms that decide at the bill spend that week filing.
Doing it from the books
In Autobooks the section is chosen when the bill is recorded, the rate applies from there, thresholds are tracked per deductee, deductions carry through to the challan, and certificates are available to the deductee in the client portal — so nobody has to email them.
Bring a quarter of vendor bills
We will show sections applied at entry and tracked to challan — in thirty minutes.
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