TDS/TCS and Advance Tax
This domain tests withholding and collection at source, payment and return timelines, and the advance-tax instalment system.
Core rules
- TDS applies to specified payments such as salary under section 192, interest under 194A, dividends under 194, contractor payments under 194C, professional fees under 194J and rent under 194I. Thresholds and rates depend on the section and the payee’s status.
- Tax deducted is deposited by the 7th of the following month; tax deducted in March is generally deposited by 30 April. Quarterly statements are filed in the prescribed forms, and certificates are issued to the deductee.
- TCS under section 206C applies to specified transactions. The collector must deposit and report tax similarly. Lower or nil deduction requires a certificate or declaration where allowed.
- Advance tax applies where tax liability after TDS is ₹10,000 or more. Instalments are 15% by 15 June, 45% by 15 September, 75% by 15 December and 100% by 15 March. Presumptive assessees generally pay the whole amount by 15 March.
- Shortfall attracts interest under section 234B and deferment interest under section 234C.
Worked example
A company pays ₹1,00,000 as professional fees to a resident. Section 194J applies at 10%, so TDS is ₹10,000, assuming the threshold is crossed and no lower-deduction certificate applies. The company deposits ₹10,000 by the 7th of the next month and reports it in the quarterly statement.
Traps
Apply the correct threshold and section; check PAN and lower-deduction certificates; do not miss the March deposit exception; distinguish TDS from TCS; advance tax is on tax after TDS, not on turnover.