What is TDS?
TDS is tax deducted by a payer from a payment or credit covered by the applicable income-tax provision. The deductor deposits it with the Government, reports it in the prescribed statement and provides the relevant certificate or information to the deductee.
Payments that may require review
- Salary and employee-related payments.
- Professional or technical fees.
- Contractor and subcontractor payments.
- Rent, commission, brokerage or interest.
- Property and specified purchase transactions.
- Payments to non-residents, which require additional analysis.
A practical TDS workflow
- Identify the payment and recipient category.
- Check the current provision, threshold, rate and timing rule.
- Verify PAN, residential status and supporting declaration or certificate.
- Deduct tax at the correct event and book the liability.
- Deposit the amount within the applicable timeline.
- File the correct statement and issue or download the certificate.
- Reconcile ledger, challan, statement and tax-credit records.
TAN and record keeping
Businesses subject to TDS obligations generally need the appropriate tax-deduction account setup and should quote correct identifiers in payments and statements. Maintain payee master data, deduction workings, challans, acknowledgements and correction records.
Common TDS errors
- Deducting at an outdated or incorrect rate.
- Applying the wrong payment category.
- Missing tax because the threshold was tracked vendor-by-vendor incorrectly.
- Late deposit or delayed statement filing.
- PAN or challan mismatch in the statement.
- Not reconciling the expense ledger with filed TDS data.
Monthly TDS control checklist
| Control | Evidence |
|---|---|
| Vendor review | PAN, status and payment nature |
| Deduction | Invoice/payment working |
| Deposit | Challan and ledger match |
| Statement | Filed acknowledgement and validation |
| Certificate | Issue/download record |
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