Employer TDS · s.192 · Form 24Q/26Q/27Q · s.234E
Employer TDS: the 7th-of-the-month challan, the quarterly return, and the ₹200-a-day late fee.
TDS is your money to collect and the government's money to receive — on a schedule that does not wait for your accountant. The three clocks that matter: the 7th of each month, the quarter-end return, and s.234E running while you delay.
The four issues
Where this area actually goes wrong.
Each of the four pillars below is statute-cited — the section, the form, and the consequence. No vague claims.
Who deducts what — s.192 and the s.194 series
On salary, the employer deducts TDS under s.192 at the average rate of income tax on the employee's estimated annual income — month by month, adjusted for Form 12B when an employee joins mid-year. On non-salary payments, the s.194 series applies at credit or payment, whichever is earlier: s.194C contractors (1% individual/HUF, 2% others), s.194J professional and technical fees (10%), s.194H commission and brokerage (5%), s.194I rent (2% plant & machinery, 10% land & building), s.194B winnings (30%). Two multipliers override these rates: s.206AA (no PAN — deduct at 20%) and s.206AB (non-filer of return — the higher of twice the prescribed rate or 5%). Section 204 fixes the person responsible — for salary, the employer.
s.192 average rate · s.194 series at credit/payment · s.206AA 20% no-PAN · s.206AB non-filer rates
The monthly challan — the 7th of next month
TDS deducted in a month must be deposited by the 7th of the following month — Rule 30 of the Income-tax Rules, read with s.200(1). The exception is March: tax deducted in March is due by 30 April. Government deductors deposit on the same day the tax is deducted. A day's delay starts interest under s.201(1A) at 1% per month if you never deducted, and 1.5% per month if you deducted but did not deposit. Most TDS defaults in small companies are not deduction failures — they are deposits that slipped a week past the 7th.
Rule 30: 7th of next month · March by 30 Apr · s.201(1A) 1%/1.5% interest
The quarterly returns — Form 24Q, 26Q, 27Q
Every quarter you must file a TDS statement: Form 24Q (salaries), Form 26Q (non-salary payments to residents) and Form 27Q (payments to non-residents other than salary). The due dates under s.200(3) read with Rule 31A are fixed: 31 July (Q1), 31 October (Q2), 31 January (Q3) and 31 May (Q4). Filing late attracts a fee under s.234E of ₹200 for every day of delay — capped at the amount of TDS in the statement — and the CPC processes the statement under s.200A into a demand intimation that includes interest and the fee. Form 16 (salary) goes to each employee by 15 June under s.203 read with Rule 31; Form 16A (non-salary) within 15 days of the quarter end.
s.200(3) + Rule 31A: 31 Jul/Oct/Jan/May · Form 16 by 15 Jun · s.200A processing
The consequences chain — s.234E, s.271H, s.40(a)(ia)
A TDS default is never one penalty — it is a chain. The late-filing fee s.234E (₹200/day, capped at the TDS amount) is computed first when the return is processed. Interest under s.201(1A) runs on any deposit delay. Section 271H adds a penalty of ₹10,000 to ₹1,00,000 for late filing or incorrect statements. And s.40(a)(ia) disallows the entire expense if TDS was not deducted or not deposited — so a ₹10 lakh consultancy fee with missed TDS costs you the deduction (up to 30% tax) on top of interest and penalties. In extreme cases of non-deposit, s.276B carries rigorous imprisonment of three months to seven years plus fine.
s.234E ₹200/day · s.271H ₹10k–1L · s.40(a)(ia) expense disallowance · s.276B prosecution
The employer-TDS calendar — deposit, statements, certificates
The three employer-TDS clocks on one table — deposit, quarterly statements, and certificates — each row read from the repo deadline fixture and the on-disk Income-tax Act, 1961 text, with the provision named. Rows marked VERIFY depend on an Income-tax Rules, 1962 prescription (Rules 30, 31, 31A) whose text is not yet filed in kb-sources; the fixture encodes the rule arithmetic and the Act text carries the obligation and consequence.
| Filing | Due | Who / when it applies | If missed | Source |
|---|---|---|---|---|
| TDS deposit — monthly challan (Rule 30 clock) | By the 7th of the following month; tax deducted in March — by 30 April | Every deductor: the employer s.192 clock and the s.194 series — "Any person deducting any sum in accordance with the foregoing provisions of this Chapter shall pay, within the prescribed time, the tax … to the credit of the Central Government" (s.200(1)); the 7th/30-April arithmetic is configured in the repo deadline fixture (id TDS-DEPOSIT, due_rule day 7 month_offset 1 with the period_month 3 → day 30 month 4 exception) [VERIFY the rule-number prescription against the current Income-tax Rules, Rule 30 text — the Rules are not yet in kb-sources] | Interest under s.201(1A) — at 1% per month for the period of default where tax was not deducted, 1.5% per month where deducted but not deposited; the fee machinery for late statements is s.234E (see the quarterly-statement row) | apps/harunraaj-com/lib/deadlines/legacy-rules.fixture.jsonRepo deadline fixture, id TDS-DEPOSIT (due_rule day 7, month_offset 1; exception period_month 3 → 30 April); deposit obligation: ITA 1961 s.200(1) (research-library/d1-tax-planning-l2/sources/ita-1961-as-amended-fa-2025-cleartax-copy.txt, L35788); interest s.201(1A) (same file). |
| Form 24Q — quarterly salary TDS statement | 31 July (Q1) · 31 October (Q2) · 31 January (Q3) · 31 May (Q4) | Every employer deducting salary TDS: "shall, after paying the tax deducted … prepare such statements for such period as may be prescribed and deliver … such statement in such form … and within such time as may be prescribed" (s.200(3)); the quarter map is configured in the repo deadline fixture (id TDS-RETURN, quarters q1 31 Jul / q2 31 Oct / q3 31 Jan / q4 31 May) [VERIFY the Form 24Q prescription (Rule 31A) against the current Income-tax Rules text — the Rules are not yet in kb-sources] | Fee under s.234E — computed in statement processing: s.200A(1)(c) "the fee, if any, shall be computed in accordance with the provisions of section 234E"; ₹200/day, capped at the TDS amount (hub prose, employer-tds.ts pillar 03); intimation issued under s.200A(1)(e) | apps/harunraaj-com/lib/deadlines/legacy-rules.fixture.jsonRepo deadline fixture, id TDS-RETURN (quarters map); statement obligation: ITA 1961 s.200(3) (research-library/d1-tax-planning-l2/sources/ita-1961-as-amended-fa-2025-cleartax-copy.txt, L35800-35803); fee-in-processing: s.200A(1)(c) (same file, L35838). |
| Form 26Q — quarterly non-salary statement (residents) | 31 July (Q1) · 31 October (Q2) · 31 January (Q3) · 31 May (Q4) | Every deductor for non-salary payments to residents (the s.194 series at credit or payment, whichever is earlier — s.194C(1) "at the time of credit … or at the time of payment thereof … whichever is earlier"); statement obligation s.200(3); quarter map as configured in the repo fixture (id TDS-RETURN) [VERIFY the Form 26Q prescription (Rule 31A) against the current Income-tax Rules text — the Rules are not yet in kb-sources] | Fee under s.234E via s.200A(1)(c) processing; disallowance exposure under s.40(a)(ia) where TDS was not deducted or not deposited before the prescribed time (hub prose, employer-tds.ts pillar 04) | apps/harunraaj-com/lib/deadlines/legacy-rules.fixture.jsonRepo deadline fixture, id TDS-RETURN; statement obligation: ITA 1961 s.200(3) (research-library/d1-tax-planning-l2/sources/ita-1961-as-amended-fa-2025-cleartax-copy.txt, L35800-35803); credit-or-payment trigger: s.194C(1) (same file, L34401). |
| Form 27Q — quarterly statement (non-resident payments) | 31 July (Q1) · 31 October (Q2) · 31 January (Q3) · 31 May (Q4) | Deductors paying to non-residents other than salary (s.195 machinery; the hub names Form 27Q in pillar 03); statement obligation s.200(3); quarter map as configured in the repo fixture (id TDS-RETURN) [VERIFY the Form 27Q prescription (Rule 31A) against the current Income-tax Rules text — the Rules are not yet in kb-sources] | Fee under s.234E via s.200A(1)(c); the s.195(6)/collected-sum machinery applies to specified non-resident payments (out of this table's scope) | apps/harunraaj-com/lib/deadlines/legacy-rules.fixture.jsonRepo deadline fixture, id TDS-RETURN; statement obligation: ITA 1961 s.200(3) (research-library/d1-tax-planning-l2/sources/ita-1961-as-amended-fa-2025-cleartax-copy.txt, L35800-35803); Form 27Q naming: app/hub-content/employer-tds.ts pillar 03 ("Form 27Q (payments to non-residents other than salary)"). |
| Form 16 — annual salary certificate (Form 16) | By 15 June following the financial year end | Every employer: "Every person, being an employer, referred to in sub-section (1A) of section 192 shall, within such period, as may be prescribed, furnish to the person in respect of whose income such payment of tax has been made, a certificate to the effect that tax has been paid to the Central Government" (s.203(2)) — the 15 June period is the Rule 31 prescription stated in the hub prose (employer-tds.ts pillar 03: "Form 16 (salary) goes to each employee by 15 June under s.203 read with Rule 31") [VERIFY the 15 June period against the current Income-tax Rules, Rule 31 text — the Rules are not yet in kb-sources] | No direct fee section for certificate delay — the exposure routes through the employer's statement defaults (s.234E/271H) and employee-side credit mismatches (hub prose, employer-tds.ts darkItem "The challan is not the return") | research-library/d1-tax-planning-l2/sources/ita-1961-as-amended-fa-2025-cleartax-copy.txtITA 1961 s.203(2) certificate obligation (L35951 "within such period, as may be prescribed, furnish to the person in respect of whose income such payment of tax has been made, a certificate"); 15 June period: app/hub-content/employer-tds.ts pillar 03, itself citing s.203 read with Rule 31. |
| Form 16A — non-salary TDS certificates | Within 15 days of the quarter end | Every deductor: "Every person deducting tax … shall, within such period as may be prescribed from the time of credit or payment of the sum … furnish to the person to whose account such credit is given … a certificate to the effect that tax has been deducted" (s.203(1)) — the 15-days-after-quarter-end period is the Rule 31 prescription stated in the hub prose (employer-tds.ts pillar 03) [VERIFY the 15-day period against the current Income-tax Rules, Rule 31 text — the Rules are not yet in kb-sources] | Exposure via the underlying statement chain (s.234E, s.271H) — the certificate obligation itself carries its prescribed period, not a fee | research-library/d1-tax-planning-l2/sources/ita-1961-as-amended-fa-2025-cleartax-copy.txtITA 1961 s.203(1) certificate obligation (L35945 "within such period as may be prescribed from the time of credit or payment of the sum"); 15-day period: app/hub-content/employer-tds.ts pillar 03 ("Form 16A (non-salary) within 15 days of the quarter end"). |
Scope: employer TDS (s.192, the s.194 series, s.195 payments as named in the hub) under the Income-tax Act, 1961 consolidated to the Finance Act, 2025 (secondary copy — verify against the gazette per TdsEvidenceData). Government-deductor same-day deposits and other deductor classes are out of this table's scope. Confirm the current quarter's dates with us before filing.
The honest angle
Why small companies lose the most money on TDS
Nobody plans to default on TDS. The losses come from the three clocks running silently — the 7th, the quarter end, and the April reconciliation — and from treating the challan as the end of the job.
The challan is not the return
Depositing TDS by the 7th keeps interest away, but the credit only appears in the employee's 26AS once the quarterly statement is filed and the challan matches. A paid-but-unfiled quarter is invisible to the employee and to the CPC — and it is the most common 26AS dispute.
s.40(a)(ia) is the expensive surprise
A vendor invoice you never deducted TDS on is not just an interest problem — the whole expense can be disallowed at assessment, adding 25–30% tax on the gross amount. The disallowance is why TDS mistakes are usually bigger than the TDS itself.
The quarter-end panic is real
May is the worst month: the Q4 return (31 May) overlaps the Q1 return of the new year (31 July) and Form 16 certificates (15 June). Companies that reconcile quarterly, not annually, are the ones that never file late.
PAN and 26AS hygiene
A missing or wrong PAN triggers s.206AA at 20% on every invoice — and wrong PANs in the statement create 26AS mismatches that surface as employee-side notices a year later.
Our engagement
Five tracks for a clean employer-TDS year.
TDS setup and structure
TAN application, deductor registration, deductor master creation, and the payment-wise challan setup for salary and contractor TDS.
One-time
Monthly challan calendar
Deposit calendar for the 7th of each month (Rule 30) with a pre-month cutoff so the 7th is never a scramble.
Monthly
Quarterly returns — 24Q / 26Q / 27Q
Statement preparation, PAN validation, and filing by 31 Jul/Oct/Jan/May (s.200(3), Rule 31A) with CPC intimation follow-up.
Quarterly
Form 16 / 16A certificates
Annual Form 16 to employees by 15 June and quarterly Form 16A to vendors within 15 days of quarter end (s.203, Rule 31).
Annual + quarterly
Default rectification
s.234E fee, s.201(1A) interest, s.271H penalty, and s.40(a)(ia) disallowance — correction of past quarters and the reply to CPC intimations.
As needed
FAQs
Five questions every employer asks about TDS.
By what date do I have to deposit the TDS I deducted this month?
By the 7th of the following month — Rule 30 of the Income-tax Rules read with s.200(1). TDS deducted in March is due by 30 April instead. Government deductors deposit on the day of deduction itself. If you deduct but deposit late, interest under s.201(1A) runs at 1.5% per month from the date the tax was deductible; if you fail to deduct at all, the rate is 1% per month. The 7th is a hard date — no grace period is provided in the statute.
What is the late fee for filing Form 24Q or 26Q after the due date?
Under s.234E, a fee of ₹200 per day of delay applies to a late TDS statement, capped at the total amount of TDS in the statement. On top of that: interest under s.201(1A) if the deposit itself was late, and under s.271H a penalty of ₹10,000 to ₹1,00,000 for late filing or furnishing incorrect information (the penalty is the prescribed consequence; waiver is not automatic). The fee and interest are computed by the CPC when the statement is processed under s.200A, and TRACES blocks further certificates until the demand is resolved. A quarter filed 60 days late with ₹2 lakh of TDS costs ₹12,000 under 234E alone before anything else.
What happens if I never deposit the TDS I deducted from salaries?
The company is treated as an assessee in default under s.201(1) for the tax not paid. The consequences stack: interest at 1.5% per month under s.201(1A) from the date the tax was deductible; the expense disallowed under s.40(a)(ia) (so the salary-related deduction can be denied); a penalty under s.271H; and for deliberate non-deposit, prosecution under s.276B carries rigorous imprisonment of three months to seven years plus fine. The employee still gets no 26AS credit until the challan is matched and the statement filed — so the employees are harmed too, and they will file complaints. There is no business reason to sit on deducted TDS; the deposit is not optional cash flow.
My vendor has no PAN. What TDS rate applies?
Section 206AA forces a higher rate when the payee has no PAN: 20% (or the rate prescribed in the relevant section, whichever is higher). Section 206AB adds another override for payees who have not filed their income-tax return: the higher of twice the prescribed rate or 5%. Both apply regardless of the underlying section — so a ₹5 lakh contractor invoice from a PAN-less, non-filing vendor is not taxed at 1% under s.194C but at 20% under s.206AA. The remedy is on the vendor side: obtain the PAN before payment, or have the vendor file the return. A wrong or missing PAN in the quarterly statement also creates a 26AS mismatch that the vendor will fight about a year later.
Can my employee claim TDS credit in the ITR for salary I deducted but never deposited?
No — and this is where employers feel the pain. TDS credit appears in the employee's Form 26AS only after the challan is deposited AND the quarterly statement (24Q) is filed and matched. If you deducted but did not deposit or file, the employee's ITR claim produces a mismatch: the department does not see the credit, the employee gets an intimation or notice, and the employer is left with s.201(1) default plus interest plus the s.40(a)(ia) disallowance. Employees do not forget this — the credit is their refund. The fix is a reconciliation before each quarter end: challan vs statement vs 26AS, not after the ITR season.
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