There is a moment in every growing business where TDS stops being something deducted from your receipts and becomes something you are legally required to deduct from your payments. Almost nobody notices it happening.
The consequence of missing it is disproportionate. Where TDS was deductible and not deducted, 30% of that expense is disallowed — added back to your taxable income. The costs you assumed were reducing your tax are the very ones that increase it.
Where the sections went
The Income-tax Act, 2025 took effect on 1 April 2026 and consolidated the entire 194-series into Section 393, organised by payment codes. Salary TDS sits separately in Section 392. Rates and thresholds carried over unchanged — this was a structural renumbering, not a re-rating.
In practice you will need both references for a while. Your vendors, your software and your own memory still speak in the old numbers.
| Payment | Formerly | Rate | Threshold |
|---|---|---|---|
| Professional / technical fees | 194J | 10% | ₹50,000 p.a. |
| Contractual work | 194C | 1% individual / 2% others | ₹30,000 single or ₹1,00,000 aggregate |
| Commission or brokerage | 194H | 2% | ₹20,000 p.a. |
| Benefit or perquisite | 194R | 10% of fair market value | ₹20,000 p.a. aggregate |
| Rent (land & building) | 194-I | 10% | ₹6,00,000 p.a. |
| Dividend | 194 | 10% | ₹10,000 p.a. |
Thresholds reflect the Budget 2025 revisions. Confirm against the bare Act before acting on a specific case.
The sequence that keeps you out of trouble
It is five steps, and the order matters.
- Obtain a TAN. You cannot deposit TDS without one, and applying takes time you will not have on the 7th.
- Classify each vendor's service and fix the section in the engagement letter — not at payment time, when the invoice is already in front of you and the pressure is to just pay it.
- Deduct at payment or credit, whichever is earlier. Crediting the vendor's account triggers the obligation even if cash has not moved.
- Deposit by the 7th of the following month.
- File quarterly — Form 24Q for salary, 26Q for the rest — and issue Form 16A.
Deduct at payment or credit, whichever is earlier. Crediting the vendor's account triggers it even if the cash has not moved.
The benefit-in-kind rule nobody expects
The old Section 194R, now Section 393(1) Sl. 8(iv), is the provision businesses are least prepared for. If you give anyone a benefit or perquisite in the course of business — a retained product, a sponsored trip, event hospitality, a device — you must deduct 10% of its fair market value once the aggregate to that person crosses ₹20,000 in the year.
Because there is no cash payment to deduct from, you either recover the tax from the recipient or gross it up. Normal trade discounts and sales schemes are excluded, as are products returned after review. The distinction between retained and returned is worth real money and needs a written policy.
What it costs to skip it
Three separate consequences
- Disallowance: 30% of the expense added back to income.
- Interest: 1% per month for late deduction, 1.5% per month for late deposit after deduction.
- Late filing fee: ₹200 per day until the quarterly return is filed.
The uncomfortable part is that all three run simultaneously, and none of them are discretionary. If you are paying editors, designers, consultants, agencies or rent and do not currently hold a TAN, that is the gap worth closing first.
This article is general guidance as at 12 August 2026 and is not advice on any specific situation. References reflect the Income-tax Act, 2025 (in force from 1 April 2026), the CGST and IGST Acts as amended, and GST rates effective 22 September 2025. Please obtain advice on your own facts before acting.