The TDS compliance cycle: what has to happen every month and every quarter

Pending professional review. This guide is awaiting review by our Chartered Accountants.

TDS (tax deducted at source) and TCS (tax collected at source) turn every business that pays salaries, rent, professional fees or contractors into a part-time tax collector. The obligations repeat, and a slip in one step usually shows up months later as a default notice.

1. Before the first deduction

• Obtain a TAN (Tax Deduction and Collection Account Number).
• Map your recurring payments — salary, rent, professional fees, contracts, commission, interest — to the provisions that apply to them.
• Collect PANs from payees; deduction without a valid PAN generally attracts a higher rate.

2. Every month

• Compute the TDS on each payment or credit, whichever the law treats as the trigger.
• Deposit the tax with the government within the due date, using the correct section code and assessment/tax year on the challan.
• Reconcile TDS due with TDS deposited.

3. Every quarter

• File the quarterly TDS/TCS statements — separate statements apply for salary, for other payments to residents, for payments to non-residents and for TCS.
• Issue TDS certificates to payees after the statement is processed.

4. When something doesn't match

• Wrong PAN, wrong challan details or short deduction lead to defaults. Most are fixed by filing a correction statement.
• Review defaults on TRACES regularly rather than waiting for a notice.

Rates and thresholds change with each Finance Act, and the Income-tax Act, 2025 renumbers the provisions from 1 April 2026. Our TDS calculator gives an indication; our TDS services can run the whole cycle for you.