As the new financial year begins, businesses are once again gearing up for a fresh cycle of tax compliance. One of the most significant and routine obligations faced by businesses of all sizes is Tax Deducted at Source (TDS). With technological advancements in tracking compliance and stricter scrutiny by tax authorities, TDS compliance has become a critical area that demands timely attention.
Let’s explore what’s new in FY 2025-26, revisit important deadlines, and highlight key mistakes that businesses should consciously avoid.
What’s New in TDS for FY 2025-26?
While the TDS framework remains largely consistent, the following changes and trends should be kept in mind this year:
- Increased Usage of AIS and TIS: The Income Tax Department continues to integrate TDS data with the Annual Information Statement (AIS) and Taxpayer Information Summary (TIS). Mismatches can trigger automated notices even for minor omissions.
- Section 194S & Virtual Assets: Businesses engaging in digital asset transactions must continue to deduct TDS under Section 194S. Although not new, compliance here is still evolving.
- Lower or Nil Deduction Certificates: Assessees must renew or apply afresh for certificates under Section 197 for FY 2025-26. Businesses should verify the validity of these certificates for vendors.
- TDS on Benefits and Perquisites (Section 194R): This section continues to create compliance doubts. Any benefit provided in kind or in cash in the course of business or profession attracts TDS.
- PAN-Aadhaar Linking and Higher TDS Rates: Deductees who haven’t linked their PAN with Aadhaar may be subjected to higher TDS rates. Verifying PAN status before deduction is key.
Important TDS Due Dates You Should Not Miss
Missing deadlines results in not only interest and late fees under Sections 201 and 234E, but also disallowance of expenses under Section 40(a)(ia). Key due dates include:
- Monthly TDS Payment: By the 7th of the next month (except March, which is due by April 30).
- Quarterly TDS Return Filing:
- Q1 (Apr–Jun): 31st July
- Q2 (Jul–Sep): 31st October
- Q3 (Oct–Dec): 31st January
- Q4 (Jan–Mar): 31st May
- TDS Certificates (Form 16/16A):
- Form 16A (Non-salary): Within 15 days from the due date of TDS return filing.
- Form 16 (Salary): By 15th June of the following year.
Common Mistakes Businesses Should Avoid
Despite automation, the following errors continue to invite penalties or notices:
- Non-verification of PAN details: Ensure deductee PANs are accurate and valid to avoid higher deductions.
- Deducting TDS at incorrect rates: Especially in cases involving non-residents, freelancers, or new sections like 194R.
- Failure to deposit TDS in time: Delays attract interest @ 1.5% per month and possible disallowance of related expenses.
- Mismatch between TDS returns and actual payments: Reconcile Form 26AS/AIS with books regularly.
- Not issuing TDS certificates timely: Impacts the deductee’s tax filing and may strain business relationships.
Conclusion
TDS is no longer a “routine” function that can be pushed to the background. With digital scrutiny and integration of information across platforms, businesses must ensure their TDS compliances are prompt, accurate, and well-documented. Regular internal audits, reconciliations, and professional advice can go a long way in staying clear of unnecessary notices or penalties.
As Chartered Accountants, our role includes helping clients navigate these nuances efficiently. Timely communication, PAN validation, and updated rate application are the cornerstones of smooth TDS compliance.
