In India, understanding Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) is crucial for both businesses and individuals. These mechanisms help the government collect taxes effectively. In this article, we will delve into what TDS and TCS are, their significance, and related aspects.


Tax Deducted at Source (TDS) is income tax reduced/deducted from the amount paid/payable at the time of making (or making provisions) of specified payments such as interest, commission, brokerage, rent, winning from lottery/ crossword puzzle/horse race, payments to contractors, insurance commission, technical services, professional services, purchase of goods, on benefits received by doctors and social media influencers, owners of e-commerce platforms, borrowers of education loans, cash withdrawals, perquisite in respect of business or profession & payment on transfer of virtual digital asset etc. The person making payment is required to deduct tax at source at the prescribed rate and the amount so deducted is deposited in Government Account as TDS. The Payer is known as deductor and the payee, who receives the net payment is called the deductee. The credit of such TDS made by payer shall be given to the payee in the TDS return.

TCS is Tax Collected at Source by seller from buyers at the time of selling some prescribed goods. Seller is called ‘collector’ and the buyer is called ‘collectee’.

The applicable sections for the TDS & TCS are mentioned in Chapter XVII of the Income Tax Act, 1961 u/s 192 to 206CCA of the Act.

What is TAN ?

Tax deduction Account Number (TAN) is a 10 digit alphanumeric number issued by the Income Tax Department and every person deducting/collecting tax at source is required to obtain and quote it in every correspondence/ communication related to TDS/TCS.

Note : Not mandatory in case of tax deduction on :

1) Purchase of immovable property u/s 194IA;

2) Payment of rent (paid by non-auditable Individual &HUF ) u/s 1941B;

3) Payment of Contractual/Commission/Brokerage/ Professional Services (paid by non-auditable Individual & HUF) u/s 194M.


  • Mandatory to register on TRACES ( before use.
  • View “Deductor Dashboard” to know about TDS performance (Statement Status, Challan Status, Default Payable, Deductor Compliance Profile).
  • View “TDS CPC Communications” on TRACES Homepage to access communications sent by CPC (TDS).
  • Online/Offline TDS Statement Corrections directly on TRACES.
  • Downloads-TDS/TCS Certificates, Transaction Based Report (TBR) for non-PAN deductees reported in Form 27Q, Consolidated File, Justification Report, TAN-PAN
  • Intermediary Communication-Alerts (SMS/email) in case of challan and PAN errors identified in regular TDS Statements during preliminary screening, to avoid Default Intimation from CPC(TDS).
  • Aggregated TDS Compliance Report – Consolidated default summary of all TANs corresponding to a PAN in case of corporates/banks (available in taxpayer login on TRACES).
  • e-Tutorials, FAQs, Circulars & Notifications and CPC (TDS) Communications.
  • Deductor Grievance Module – Request for Resolutions online on TRACES.


At the time of making the specified payment or credit of the income/payment to the deductee, whichever is earlier.

In case of TCS, tax has to be collected by the seller at the time of debiting account of buyer or at the time of receipt of such amount from buyer in cash or issue of cheque/draft, or by any other mode, whichever is earlier.

In case of TDS on salary, tax is to be deducted at the time of actual payment.

In case of TDS on rent (u/s 194IB) paid by an individual & HUF (other than specified individual or HUF – not covered under the provisions of Section 44AB), at the time of payment or credit of rent to the account of the payee for the last month of the year, whether the tenancy subsists till the last month of the year, or is vacated during the year.


Table No. 1

Mode of TDS/TCS

Due date of payment
Where tax is paid without an Income Tax Challan On the same day (applicable in case of book adjustment).
TDS/TCS made during the month of March On or before 30th April.
TDS/TCS made during the months other than March On or before 7 days from the end of the month.
TDS on purchase of immovable property (194IA)* On or before 30 days from the end of the month of deduction.
TDS on rent (194IB) * On or before 30 days from the end of the month of deduction.
(*Challan cum statement in Form 26QB/26QC needs to be filed)

Note: In certain cases, quarterly payment of TDS can be permitted with the prior approval of the Assessing Officer.


TDS/TCS is to be deposited to the credit of the Government by using Challan No. ITNS-281.

For making payment of tax deducted at source in the case of immovable property and in the case of rent of property, challan cum statement in Form 26QB and 26QC to be used, respectively.


Every Income Tax Challan is identified by CIN which contains Bank BSR Code, Date of Payment and Challan Serial No.


TDS/TCS is required to be deposited in cash/cheque in Bank through Challan manually or electronically. Electronic payment of TDS/TCS is mandatory for:

(a) All corporate assessees;

(b) Non-corporate assessees who are subject to audit under section 44AB.

Physical mode (i.e. payment by furnishing the hard copy of challan at designated bank) by furnishing the challan No. ITNS 281 in the authorized bank branch.


Every deductor/collector has to issue a certificate to the deductee/collectee in respect of tax deducted/collected by him in following form:

Download TDS/TCS certificate (Form 16/16A/27D/ 16B/16C) ( bearing unique TDS certificate number and issue to the taxpayers within due date.

Part A of Form 16 shows PANs that are reported in Annexure II of 24Q statement for 4th Quarter. Salary details for whole or part of the year in Annexure II of Quarterly TDS Statement for 4th Quarter is mandatory.

Table No. 2


No. Frequency of certificate issuance
TDS certificate on salary Form 16 Annually
TDS certificate on payments other than salary Form 16A Quarterly
TCS certificate Form 27D Quarterly
TDS certificate on purchase of immovable property Form 16B 15 days of filing 26QB
TDS certificate on rent Form 16C 15 days of filing 26QC

Multiple payments can be clubbed in quarterly TDS/TCS certificate.


Table No. 3


Form No. Frequency of certificate issuance Due date for issuance of TDS/TCS certificate
TDS certificate on salary Form 16 Annually 15′ June following the financial year.
TDS certificate on payments other than salary Form 16A Quarterly Within 15 days from the due date of furnishing quarterly TDS return
TDS certificate on purchase of Immovable property Form 16B As and when the transaction takes place 15 days of filing
Form 26QB
TDS certificate on rent Form


As and when the transaction takes place 15 days of filing
Form 26QC
Quarterly Within 15 days from the due date of furnishing quarterly TDS return.
TDS certificate u/s 194M Form


As and when the transaction takes place Within 15 days of
filing Form 26QD

W.e.f. . 01/04/2012 it is mandatory for all deductors to issue TDS certificate in Form 16A generated through TIN Central System which is downloaded from TIN website with a unique TDS certificate number. The deductor shall download such certificate from TIN Central System, verify the correctness of contents & authenticate the correctness of contents before issue of said certificate by digital or manual signature. Then only, it will be treated as a valid certificate.


The TDS/TCS certificate contains the following details:

(a) Amount of TDS/TCS;

(b) Valid PAN of the deductee;

(c) Valid TAN of the deductor/collector;

(d) Challan Identification Number (CIN), which is a number generated by a combination of BSR code of the bank where tax is deposited, date of deposit and the challan serial number allotted by the bank;

(e) Receipt number of the relevant quarterly statement of TDS/TCS (i.e., TDS/TCS return).


  • Every person responsible for deducting/collecting tax at source must furnish TDS/TCS statement.
  • Correct Reporting: Cancellation of TDS/TCS statement already filed and deductee details is no longer permissible now. Accordingly, it is very important now, to report correct and valid particulars (PAN/TAN/category etc.) in the quarterly TDS/TCS statement.
  • Quote correct and valid lower rate TDS/TCS Certificate Number in TDS/TCS statement in case of lower deduction. The deductor/collector can verify the lower TDS/TCS Certificate number online on the TRACES website
  • Last provisional receipt number to be quoted in regular TDS/TCS statements: While filing new regular (original) TDS/TCS statement in any Form, it is mandatory to quote the last accepted provisional receipt number of the regular quarterly TDS/TCS statement of any form type.

TDS/TCS statement cannot be filed without quoting an valid challan and deductee row.

  • Download TAN-PAN Master from TRACES and use the same to file new statement to avoid quoting of incorrect and invalid PAN.
  • Validate PAN and name of fresh deductees from TRACES before quoting it in TDS statement.
  • File correction statements promptly in case of incomplete and incorrect reporting. The TRACES website provides the facility for Online Correction of Statements.
  • Government deductors should obtain BIN (Book Identification Number) from their Accounts Officer (AIN holder) on time and quote the same correctly in TDS/TCS statement.

Table No. 4

Statement in respect of TDS/TCS

TDS/TCS statement Form
TDS on salary Form No. 24Q
TDS on payment other than salary to a non- resident or a foreign company or a resident but not ordinarily resident. Form No. 27Q
TDS on payment other than salary to any person other than above. Form No. 26Q
TCS Form No. 27EQ
TDS on sale of immovable property Form No. 260B
TDS on payment of rent by certain individual or HUF Form No. 26QC
TDS u/s 194M Form No 26 QD


Due dates for filing of TDS/TCS statement :

Table No. 5

Quarter ending on

Due date of TDS Statement Due date for 16A Due dates of TCS Statement Due date for 27D
30th June 31th July 15th August 15thJuly 30thJuly
3Oth September 31thOctober 15th November 15th October 30th October
31th December 31th January 15th February 15th January 30th-January
31th March 31th May 15th June 15th May 30thMay


In case of non filers where tax is required to be deducted at source under the provisions of Chapter XVIIB, other than section 192, 192A, 194B, 194BB, 194-IB, 194LBC, 194M or 194N on any sum or income or amount paid, or payable or credited, by a person to a specified person, the tax shall be deducted at the higher of the following rates, namely:—

(i) at twice the rate specified in the relevant provision of the Act; or

(ii) at twice the rate or rates in force; or

(iii) at the rate of five per cent.

Further, if the provisions of section 206AA is applicable due to non furnishing of PAN in addition to the provision of this section, the tax shall be deducted at higher of the two rates provided in this section and in section 206AA. “Specified person” means a person who has not furnished the return of income for the IncoCZYZ Department assessment year relevant to the previous year immediately preceding the financial year in which tax is required to be deducted, for which the time limit for furnishing the return of income under sub-section (1) of section 139 has expired and the aggregate of tax deducted at source and tax collected at source in his case is rupees fifty thousand or more in the said previous year. Further, the specified person shall not include a non-resident who does not have a permanent establishment in India.

Income Tax Department has released a new functionality to facilitate tax deductors/collectors to verify if a person is a “specified person” as per above sections.


Registration: Tax deductors/collectors can register on the Reporting portal by logging in to e-filing portal ( by using e-filing login credentials of TAN and clicking on link “Reporting portal” which is available under “Pending Actions” tab of the e-filing portal. After being redirected to the Reporting portal, the tax deductor/collector needs to select Compliance check. The details of Principal officer also need to be provided. The principal officer is the authorised person of the tax deductor/collector to use the compliance check functionality on reporting portal. After submission of the registration request, e­mail notification will be shared with the Principal officer along with login credentials.

Accessing the Compliance check functionality: Principal officer of the entities which are registered with the Reporting portal through TAN shall be able to use the functionality after login into the portal. Under the compliance check section “PAN Search” Tab may be selected to access the functionality in PAN search mode.

For any assistance in this matter tax deductors/collectors can refer to quick reference guide or FAQs available under ‘Resources’ section of Reporting portal or navigate to ‘Help’ section for any query.

Reporting portal or navigate to 'Help' section for any query


  • Failure to deduct tax or short deduction of tax or failure/delay in payment of the tax deducted to the credit of Government by the due date, would make the deductor an assessee in default in respect of such tax and also liable to penalty which is equal to the amount for which the assessee is a deemed defaulter.
  • In case of non-deduction/short deduction or delay in deduction of tax, interest @ 1% per month or part of the month is levied on the tax deductible and in case of delay in payment of tax after deducting, interest @ 1Yz% per month or part of the month, till such time the tax deducted is not credited to the Government shall also be payable.
  • In case of delay in payment of tax after collecting, interest @1% per month or part of the month till such time the tax is not paid.
  • Failure on part of the deductor to pay the tax deducted at source, to the credit of Central Government makes him liable to rigorous imprisonment of a minimum period of three months but which may extend to seven years.

Delay in filing TDS/TCS quarterly statements attracts:

(i) Late fee of Rs. 200/- per day for each day of default, subject to certain limits, but not more than the TDS amount u/s 234E.

(ii) Minimum Penalty of Rs. 10,000/- (may be extended to Rs. 1 Lakh) u/s 271H.

Download the justification report to know the details of TDS/TCS defaults, if any, on processing of TDS/TCS statement from the TRACES website


(i) With effect from 1st July, 2012 failure to file TDS/TCS statement within the prescribed time shall make the deductor/collector liable to pay by way of fee u/s 234E of the Act, a sum of two hundred rupees for each day during which the default continues.

(ii) With effect from 1st July, 2012 for delay in filing the TDS/TCS quarterly statement or furnishing of incorrect TDS/TCS quarterly statement by the deductor/collector would make him liable to penalty u/s 271H of the Act, which shall not be less than Rs. 10,000/- but which may extend to Rs. 1,00,000/- .

(iii) No penalty u/s 271H will be levied for the failure to file the TDS/TCS return, if the person proves that after paying tax deducted/collected by him along with the late filing fee and interest, if any, to the credit of the Central Govt. he had filed the TDS/TCS return before the expiry of one year from the due date of filing the TDS/TCS return.

(iv) Failure to obtain the TAN or quote correct TAN by the deductor may result in levy of penalty of Rs. mow- u/s 272BB of the Act.

(v) La filing fee u/s 234E, being statutory i re, cannot be waived off. so._


  • The PAN of an entity (Central Office, Headquarter etc.), having more than one TAN of its branches, associated with the referenced PAN, can review the “Aggregated TDS Compliance” report on a regular basis for a summary TDS compliance at Organization level.
  • This feature provides for a summary of TDS defaults of all respective TANs across all Financial Years, which assists in effective TDS administration, monitoring, control and compliance at Organization level.
  • The feature will be extremely useful for the purpose of complying with the provisions of Section 40(a)(ia) of the Income Tax Act, 1961 by the concerned entity, to ensure that correct information is disclosed in paragraph 21(b) & 34(b) of the Tax Audit Report (Form 3CD u/s 44AB of the Act).
  • To use this feature, the deductor needs to register on TRACES with their PAN.


The statement of TDS/TCS can be filed either in:

(1) Paper form (for less than 20 deductees), now discontinued in all cases.

(2) Electronic form : Form No. 27A is also to be furnished along with return on electronic form.

Following deductors/collectors have to file the statement of TDS/TCS in the form specified in electronic form only.

(a) Deductor who is an office of the Government; or

(b) Deductor who is a company; or

(c) Deductor who is a person who is required to get his accounts audited under section 44AB in the immediately preceding financial year; or

(d) Deductor in whose case the number of deductee’s records in the quarterly statement for any quarter of the financial year is equal to or more than twenty.

Note: In case of any other deductor/collector, furnishing the quarterly statement in electronic form is optional.


If the deductee does not furnish PAN or furnishes incorrect PAN to the deductor/collector, the deductor/collector shall deduct tax at source at higher of the following rates:

(a) the rate prescribed in the Act; or

(b) at the rate in force, i.e., the rate mentioned in the Finance Act;


(c) at the rate of 20%.

What is Lower Deduction Certificate?

On receipt of the online application 13 filed by the deductee after verifying the details submitted thereon, the assessing officer issues a certificate for deduction of Tax at Lower/Nil Rates under section 197/197A of the Income Tax Act, 1961. The assessing officer can also issue certificate for— no deduction of tax to the deductor where the deductee is a non-resident.


  • Business is expected to incur losses.
  • Huge Losses are being carried forward from previous year.
  • TDS is being deducted at a high rate but tax slab attracted by assessee’s income is lower.
  • Assessee is entitled to claim certain deductions/ exemptions in that year.


Certificate for lower deduction of TDS can be obtained for incomes covered by following provisions:

  • Sec 192(Salary),
  • Sec 193 (Interest on securities),
  • Sec 194 (Dividend),
  • Sec 194A (Interest other than Interest on Securities),
  • Sec 194C (Contract),
  • Sec 194D (Insurance Commission),
  • Sec 194G (Commission etc. on sale of the lottery),
  • Sec 194H (Commission/brokerage),
  • Sec 194-I (Rent),
  • Sec 194J (Income from Professional/technical services),
  • Sec 194LA (Compensation on an immovable property),
  • Sec 194LBB (Income from units in investment fund),
  • Sec 194LBC (Income from investment in securitization fund),
  • Sec 194M (Payment of brokerage or commission, payment made to a contractor or a professional by certain Individuals/HUF),
  • Sec 1940 (TDS on payment by e-Commerce operator to e-Commerce Participant) and
  • Sec 195 (Payment of any other income to non-residents).


  • Any assessee who wishes to apply for the certificate of No deduction of TDS or deduction at lower rate shall have to make an application in Form No. 13 as prescribed under the Income Tax Rules, 1962.
  • Enabled online filing of Form 13 in order to facilitate faster processing of applications. The AO is required to dispose off the application within a time period of 30 days from the end of the month in which application is received by him.
  • If the application submitted is complete and AO is satisfied with the information and justification provided for deduction of lower TDS, the application will be forwarded to the supervisory authority for administrative approval. Once approval of the competent authority has been received, the “”1111 assessing officer shall generate the approval certificate/close the request in case of rejection, through TRACES AO portal. The generated certificate shall be available to the deductor and the applicant for download through their TRACES login. Every certificate issued has a unique 10 digit alpha-numeric number.
  • After receiving the lower/nil deduction/collection certificate, to avoid deduction of TDS/ collection of TCS at a higher rate, the assessee will have to furnish a copy of AO’s certificate (attached to the invoice raised) to the payer and if the payer is satisfied that his name is specifically stated in the certificate, he will deduct/collect TDS/TCS at the rate mentioned in the certificate.
  • While filing his TDS return, deductor is required to mention the TDS certificate no. & PAN of the deductee and validate it on the TRACES website.


  • Copy of PAN card,
  • A projected income statement for the current financial year,
  • Copies of Returns of income filed (along with enclosures) & copies of assessment orders if assessed, for the last 3 assessment years,
  • Copies of Financial Statements along with Audit Reports, if audited of last 3 years,
  • Details of tax paid in last 3 assessment years,
  • Details of payment of Advance Tax/TDS/TCS relating to current previous year till date,
  • Details relating to various incomes and their sources of the assessee,
  • TAN of parties who make payments to the assessee.


The certificate issued for nil/lower deduction of TDS pertains to that particular Financial Year for which application has been made by the assessee. It is valid from the date of issue and expires at the end of that year (unless it is cancelled by AO before its expiry).

Although Form 13 application can be submitted at any time during the year, it is recommended to furnish it at the commencement of the year itself.


  • Assessee can give a self declaration to the deductor in the prescribed form (Form 15G/15H) that the tax on his estimated total income of the previous year in which such income is to be included in computing the total income will be NIL, in order to avail nil deduction of TDS, provided he satisfies the following conditions :
  • Assessee is a resident individual/ HUF,
  • Tax liability is Nil,
  • If he is of age less than 60 years, his gross income (before deductions) must be less than the basic exemption limit (Rs. 2.5 Lakhs).

The declaration is required to be made ONLINE in the following Forms :‑

(a) Form 15H – for senior citizens.

(b) Form 15G – other than senior citizens.

  • Form 15G/15H can be filed in respect of the following incomes :

a. Withdrawal of Provident fund (Sec 192A).

b. Interest from securities (Sec 193).

c. Dividend (Sec 194) – Only individual.

d. Interest other than from securities (Sec 194A).

e. Insurance commission (194D).

f. Payment in respect of insurance policy (Sec 194DA).

g. Payment in respect of deposit under National Savings Scheme (194EE) – Only individual.

h. Rental income (Sec 1941).

i. Income in respect of Units (Sec 194K).

  • Declaration shall be treated as invalid unless the declarant furnishes his PAN in such declaration.
  • Option to file declaration using Aadhaar Number instead of PAN if the declarant does not have a PAN but has an Aadhaar or PAN and Aadhaar have been linked.

Filing of Form No. 27C for non collection of TCS by the Seller:

Form 27C is a document that can help in getting tax exemption from the tax collected at the source. Both buyers and sellers can use this for all the goods specified in the Income Tax Act. When a tax collector files his quarterly TCS return i.e. Form 27EQ, he has to provide a TCS certificate to the purchaser of the goods. Form 27D is the certificate issued for TCS returns filed. Tax collection at the source is exempted in the following cases:

  • When the eligible goods are used for personal consumption.
  • The purchaser buys the goods for manufacturing, processing or production, for generation of power, and not for the purpose of trading those goods.

Form 27C can be utilized by the buyer of goods only if the goods that are being purchased are intended for production, manufacturing or processing of further goods, articles or things. In case the goods are being purchased for the sake of trading, Form 27C cannot be used for tax exemption.

Refund Claim :

In case of excess payment of TDS/TCS, application has to be filed online in Form No. 26B – Acknowledgment receipt of refund request.

Thereafter, the Form 26B Acknowledgment is toe furnished to the concerned jurisdictional Assessing Officer ‘thin 14 days from the date of transmitting the data electronically. Failure to do so will lead to rejection of refund request.

The details of jurisdictional Assessing Officer will be available in Track Refund request within 2 days after submitting the refund request.

Further, the pending demand, if any, under PAN/TAN should be liquidated to enable the Assessing Officer to process the refund request.

Challans :

While filling up the challans, the deductor must take care to fill the following details properly and correctly:

(a) Head of payment, i.e. Corporation Tax/Income Tax,

(b) Amount and mode of payment of tax,

(c) Type of payment,

(d) Assessment Year,

(e) PAN of the Deductor,

(f) TAN of the Deductor.

The deductor can correct the mistake occurred in physical challans through bank/through assessing officer, such as (i) PAN/TAN, (ii) A.Y. (iii) Major Head, (iv) Minor Head, (v) Nature of Payment, (vi) Total amount etc.

For correction of challan, i.e. credit of taxes paid, on account of TAN wrongly mentioned in the challan etc. after the window period available to banks for challan correction, the assessee can make an application to the assessing officer who is having the jurisdiction of the correct TAN who is authorized under the Departmental OLTAS application to make such correction in challan data in bonafide cases.

Purchase of Immovable Property :

While purchasing an immovable property wherein the sale consideration of the property is equal to or exceeds Rs. 50 lakhs, the buyer should keep in mind the following points :

(a) Collect/Deduct TDS @ 1% on the total consideration u/s 194IA of the Act.

(b) TDS is to be deducted on the whole amount of property and not from the amount exceeding the property value of Rs. 50 lakhs.

(c) Collect the PAN of the seller and verify the same with the Original PAN Card.

(d) PAN of the seller as well as purchaser/buyer should be mandatorily furnished in the online Form 26QB (statement cum challan form) for furnishing information regarding the sale transaction of valid PANs. Form 26QB is to be filed within a period of 30 days from the end of the month in which deduction is made and shall be accompanied by a challan-cum­statemen in Form No. 26QB.

(e) Verify tax deducte and deposited from Part F of Form AS – Annual Tax Statement.

(f) Note down 9 digits alphanumeric acknowledgement number generated on filing of 26QB which is required for placing request of Form 16B.

(g) Download Form 16B, certificate to be issued by the deductor (buyer/purchaser) to the deductee (seller of property) in respect of taxes deducted and deposited into Govt. Account, from TRACES portal and issue it to the seller of the property.

The amount deducted as TDS on immovable property transaction will be reflected in Part A2 of 26AS of the seller, and Part F of 26AS of the buyer, respectively.

PAN verification :

The deductor can verify the correctness of PAN details provided by the deductee at TRACES by the following :

(a) Click on the functionality named “PAN Verification- under statement/ payment Tab after login at the TRACES website.

(b) Either of the following two options can be used by the deductor :

The deductor needs to provide the PAN and Form type (any quarterly TDS statement) and click on go. PAN status as active or inactive and name of the PAN holder will be displayed.

Download the consolidated TAN-PAN file for a financial year and Form Type across quarters.

The TAN_PAN master is an excel file containing the list of valid PAN. The deductor before filing any statement can download this file for any previous financial year and quarter and check for the validity of PANs of deductees to avoid repeating the mistake. Deductor needs to place the request of consolidated TAN-PAN file and needs to download from request download option once available to download.

(Republished with amendments)

Tags: ,

Join Taxguru’s Network for Latest updates on Income Tax, GST, Company Law, Corporate Laws and other related subjects.

Join us on Whatsapp

taxguru on whatsapp GROUP LINK

Join us on Telegram

taxguru on telegram GROUP LINK

Download our App


More Under Income Tax


Leave a Comment

Your email address will not be published. Required fields are marked *

Search Posts by Date

March 2024