Tax Deducted at Source (TDS) is a statutory compliance requirement for businesses, professionals, and individuals making specific types of payments in India. It is a mechanism designed by the Income Tax Department to ensure tax is collected at the very source of income. Among the most common TDS obligations are deductions made on salary, rent, and professional fees. However, despite its prevalence, many businesses in Kerala still struggle with proper deduction, deposit, and filing of TDS returns—leading to penalties and compliance issues.
Whether you are a startup in Kochi, a hospital in Kozhikode, or a consultancy firm in Thiruvananthapuram, understanding how to handle TDS correctly is crucial. This blog explains the TDS requirements on salary, rent, and professional fees, along with sector-specific applicability, deadlines, common mistakes, and how expert help can ensure full compliance.
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What is TDS and Who Should Deduct It?
TDS is applicable when specified payments such as salaries, rent, commissions, or professional fees are made. The person responsible for the payment is required to deduct tax at the applicable rate before making the payment and deposit it with the government.
Entities required to deduct TDS include:
- Companies and LLPs
- Proprietorships (based on turnover thresholds)
- Partnership Firms
- Trusts and Societies
- Government Departments
- Individuals purchasing property or paying high-value rent
The deductor must also file quarterly returns and issue TDS certificates (Form 16 or 16A) to the payees.
TDS on Salary – Section 192
TDS on salaries is governed by Section 192 of the Income Tax Act. Employers must deduct tax at source on salary payments if the total income of an employee exceeds the basic exemption limit.
Key Points:
- TDS is deducted based on the employee’s estimated annual income and applicable slab rate.
- Employers must collect investment declarations (Form 12BB) for accurate tax computation.
- TDS is deducted monthly and deposited by the 7th of the following month.
- Form 24Q is used for quarterly returns, and Form 16 must be issued annually.
For Kerala-based organizations like schools, IT firms, or hospitals, this is a mandatory process to be managed diligently.
TDS on Rent – Section 194I
Section 194I deals with TDS on rent payments for land, buildings, machinery, or furniture. TDS must be deducted if the total annual rent paid exceeds ₹2,40,000.
Applicable TDS Rates:
- 2% – On rent of plant, machinery, equipment
- 10% – On rent of land, buildings, or furniture
Applicable Sectors in Kerala:
- Retail businesses renting commercial premises
- Clinics and diagnostic centers using rented equipment
- Educational institutions renting buildings or classrooms
- Real estate developers renting office space
Form 26Q is used for quarterly filing, and Form 16A is issued to the landlord or property owner.
TDS on Professional Fees – Section 194J
TDS on professional or technical service fees is governed by Section 194J. Any payment exceeding ₹30,000 in a financial year to a professional or technical consultant is liable for TDS.
Applicable TDS Rates:
- 10% – Professional services (CA, doctors, architects, consultants)
- 2% – Technical services and royalty (except for personal use)
Examples of Applicability:
- Hospitals paying visiting consultants
- IT firms hiring freelance developers or designers
- Law firms paying fees to senior advocates or consultants
- Educational institutes engaging guest lecturers or speakers
Form 26Q is applicable for return filing, and Form 16A is issued for each deductee.
Quarterly TDS Return Due Dates
| Quarter | Period Covered | Due Date for Filing |
|---|---|---|
| Q1 | April – June | 31st July |
| Q2 | July – September | 31st October |
| Q3 | October – December | 31st January |
| Q4 | January – March | 31st May |
Challan payments should be made monthly using Form ITNS-281. Delay in payment or filing can attract penalties and interest under Sections 234E and 271H.
Common Mistakes in TDS Compliance
- Using the wrong section code during filing (e.g., 194C instead of 194J)
- Not deducting TDS due to lack of PAN of the deductee (leads to 20% rate deduction)
- Missing deadlines for deposit and return filing
- Incorrect challan or BSR code in return
- Failing to issue Form 16/16A within due dates
Such errors can lead to scrutiny, demand notices, and disallowance of expenses under Section 40(a)(ia).
Why Professional Support is Essential for TDS Compliance
TDS compliance involves legal interpretation, correct categorization, portal usage, challan verification, and return preparation—all of which can be time-consuming and error-prone. A professional service provider can help you with:
- Correct section-wise deduction and deposit
- Preparation and e-filing of Form 24Q/26Q
- Downloading and issuing Form 16 / Form 16A via TRACES
- Rectification and revision of returns, if needed
- TRACES portal registration and DSC integration
To get expert assistance for TDS compliance in Kerala, connect with OurTaxPartner.com. They offer end-to-end TDS filing services for small businesses, companies, and professional firms across Kerala.
Explore their services here: www.ourtaxpartner.com/filing-service/tds-compliance/
Conclusion: Don’t Leave TDS to Chance—Stay Fully Compliant
Managing TDS on salaries, rent, and professional fees is a key compliance responsibility for every business and organization in Kerala. Whether you have five employees or fifty, whether you’re renting office space or paying consultants—you must deduct and file TDS accurately to avoid penalties, audits, and loss of tax deductions.
With the help of expert partners like OurTaxPartner.com, you can ensure 100% compliance with minimal effort. Let the professionals handle your TDS, so you can focus on growing your business with peace of mind.
