How is TDS Return Calculated?
How is TDS Return Calculated?
Complete Guide for FY 2024–25 | Step-by-Step Process with Examples
You must understand how TDS returns are calculated and filed if you’re responsible for deducting TDS, whether as an employer, business owner, or even a tenant. It’s a key compliance activity under the Income Tax Act, and any error can lead to penalties, notices, or a mismatch in Form 26AS for the payee.
So, let’s break it down:
How is TDS return calculated, and how do you know how much TDS to deduct and report?
Here’s a step-by-step explanation of the calculation and filing process.
✅ What is a TDS Return?
A TDS return is a quarterly statement submitted by the person deducting TDS, declaring:
• The amount of payment made
• TDS deducted
• Details of the deductee (PAN, name, section)
• Challan details through which TDS was deposited with the government
✅ Step 1: Identify the Nature of Payment
Different types of income attract TDS under different sections. First, determine:
• What kind of payment is being made (salary, professional fee, rent, etc)
• Who is receiving the payment (resident, non-resident, company, individual)
| Nature of Payment | Relevant Section | Basic Threshold | TDS Rate |
| Salary | 192 | Slab-based | As per the IT slab |
| Contractor Payment | 194C | ₹30,000/single OR ₹1L/year | 1% (individual), 2% (company) |
| Professional Fee | 194J | ₹30,000/year | 10% |
| Rent | 194I | ₹2.4 lakh/year | 10% |
| Property Purchase | 194-IA | ₹50 lakh | 1% |
| Bank FD Interest | 194A | ₹40,000 (₹50,000 for seniors) | 10% |
✅ Step 2: Calculate the TDS Amount
Once you know the section and threshold, calculate:
TDS Amount = Payment Amount × TDS Rate
Example 1: Professional Fees
• Payment made to CA: ₹50,000
• Threshold: ₹30,000
• TDS Rate: 10%
➡️ TDS to be deducted = ₹5,000
Example 2: Rent Payment
• Annual Rent = ₹3,00,000
• Threshold = ₹2,40,000
• TDS @10% = ₹30,000
✅ Step 3: Deduct and Deposit TDS
• TDS must be deducted at the time of credit or payment, whichever is earlier
• Deposit TDS to the government via challan ITNS 281
• Due date for deposit is 7th of the next month
For March (the last month of FY), TDS must be deposited by 30th April.
✅ Step 4: Prepare TDS Return Statement
You need to prepare the TDS return using the prescribed form:
• Form 24Q – TDS on salary
• Form 26Q – TDS on non-salary domestic payments
• Form 27Q – TDS on payments to non-residents
• Form 26QB/26QC – One-time TDS on property or rent
Use the Return Preparation Utility (RPU) and File Validation Utility (FVU) from NSDL to generate the .fvu file.
✅ Step 5: File the TDS Return
• Log in to https://www.tdscpc.gov.in using your TAN
• Upload the .fvu file under the “e-TDS” section
• Verify using Digital Signature (DSC) or EVC
• After successful submission, download the Form 27A Acknowledgement
✅ Step 6: Validate Using Form 26AS
After the return is filed:
• The deducted amount will reflect in the deductee’s Form 26AS
• This ensures that the payee gets proper tax credit in their ITR
• Any mismatch can delay refunds or trigger notices
🧾 Final Words
Calculating and filing a TDS return involves understanding the nature of the payment, applying the correct TDS rate, and reporting it through the right form within deadlines.
It’s not just about deduction—it’s about timely deposit, accurate reporting, and matching records with PAN data.
