The five TDS mistakes that quietly cost Indian businesses money

By CA Rahul Khurana · R Khurana & Associates · August 2026

TDS is the compliance nobody thinks about until it bites. It sits in the background of ordinary payments — rent, professional fees, contractor bills, salaries — and because each deduction is small, the whole system feels low-stakes. It is not. TDS is the rare compliance where a mistake costs you three ways at once: interest on the shortfall, penalties on the default, and — the one that genuinely hurts — disallowance of the expense itself in your income tax computation.

Mistake 1: Deducting but depositing late

The most common failure isn’t forgetting to deduct — it’s deducting and then sitting on the money. TDS is generally due by the 7th of the following month, and interest applies from the very day of delay. Businesses that batch their deposits “when cash flow allows” are borrowing from the government at punitive rates without realising it.

Mistake 2: The wrong section, the wrong rate

Is that payment a contract (194C) or a professional fee (194J)? Rent for machinery or premises? Each section carries its own rate and threshold, and a wrong classification either under-deducts (your default) or over-deducts (your vendor’s cash-flow complaint). The classification decision deserves two minutes of thought at vendor onboarding, not at audit time.

Mistake 3: Missing the deduction entirely

Certain payments quietly cross TDS thresholds mid-year — rent that increased, a contractor whose annual billing crept past the limit. The obligation applies once the threshold crosses, and “we didn’t track the running total” is not a defence. The expense disallowance that follows can dwarf the tax that should have been deducted.

Mistake 4: Filing the return but forgetting the certificate

Quarterly returns filed late attract per-day fees, but even a timely filer loses goodwill by not issuing TDS certificates. Your vendors reconcile their 26AS/AIS against your certificates — mismatches surface as their problem first and your credibility problem second.

Mistake 5: Never reconciling with 26AS

The tax you deducted, deposited, and reported must appear correctly against each deductee’s PAN. A challan mapped to the wrong section, a typo in a PAN, a quarter reported wrongly — each creates a mismatch someone eventually has to unwind, usually at the worst time.

We run the full TDS cycle for clients — classification at onboarding, monthly deposits, quarterly returns, certificates, and 26AS reconciliation — as part of our outsourced accounting engagements.

This article is general information, not professional advice. Provisions, thresholds, and due dates are amended from time to time — please confirm the current position or consult us before acting. © 2026 R Khurana & Associates, Chartered Accountants, Delhi.