TDS Payment and Filing — Challan ITNS 281, Due Dates, and Quarterly Returns

Learning Objectives

• Know how to deposit TDS using Challan ITNS 281 — both at a bank and through the NSDL/TIN portal
• Memorise the due dates for TDS deposit and TDS returns
• Understand the financial consequences of non-deduction (40(a)(ia)) and late deposit (interest under 201(1A))
• Know the difference between Form 24Q (salary) and Form 26Q (non-salary)
• Compute Sunrise Retail's April 2025 consolidated TDS liability and the exact deposit deadline

Challan ITNS 281 — The TDS Deposit Instrument

TDS is deposited to the government using Challan ITNS 281. Every TDS deposit — whether for salary, contractor, rent, or professional fees — uses this same challan.

Challan ITNS 281 — Key Fields

Challan ITNS 281 — Tax Deducted at Source (TDS)

TAN of deductor:         HYDS12345A
PAN of deductor:         AACCS1234A
Assessment Year:         2026-27  (FY 2025-26 deposits → AY 2026-27)

Nature of Payment:       [Select the correct code]
  0192 — Salary (Section 192)
  0193 — Interest on securities (Section 193)
  0194C — Contractors (Section 194C)
  0194H — Commission (Section 194H)
  0194I(a) — Plant/machinery rent (Section 194I)
  0194I(b) — Land/building rent (Section 194I)
  0194J — Professional/technical fees (Section 194J)
  ... (others as applicable)

Type of payment:
  (200) TDS/TCS Payable by Taxpayer
  (400) TDS/TCS Regular Assessment (Raised by department)

Surcharge:               [usually 0 for standard deductors]
Education Cess:          [0 — cess is baked into the slab; not separately payable on TDS]
Interest:                [fill if depositing with delay — see below]
Penalty:                 [fill if assessed]
Others:                  [fill if applicable]
Total:

One Challan vs Multiple Challans

A deductor can deposit all TDS for a month in a single challan if the tax is deposited via net banking (NSDL/TIN portal). However, the challan maps to a single "nature of payment" code. If you are depositing TDS from multiple sections (194C + 194J + 194I together), technically separate challans should be used per section — or a single combined challan if the portal allows it for different section codes.

In practice: Most small and mid-size companies file separate challans per TDS section per month, so the Form 26Q reconciliation is clean.

How to Deposit — Two Methods

Method 1: NSDL/TIN Portal (online)

1. Go to onlineservices.nsdl.com → e-Payment of Taxes
2. Select Challan ITNS 281
3. Fill in TAN, assessment year, nature of payment, and amount
4. Choose your bank for net banking
5. Pay online → receive immediate Challan Identification Number (CIN) — a 7-digit receipt number that must be quoted in the TDS return

Method 2: Bank branch (offline)

1. Download Challan ITNS 281 from the income tax portal
2. Fill the challan manually
3. Submit at any authorised bank branch with the payment
4. Bank stamps and returns the counterfoil with the CIN
5. Available on NSDL portal after T+3 days

For most businesses, online payment is preferred — CIN is immediate, there is no manual error risk, and the payment reflects in TRACES within 3–5 days.

TDS Deposit Due Dates

For Non-Government Deductors (Companies, Firms, etc.)

Rule: By the 7th of the next month. March is the exception — given the complexity of year-end computations (final salary TDS adjustments, year-end accruals), deductors get until 30 April to deposit March TDS.

For Government Deductors (Central/State Government Offices)

Most central government offices use an "Account Payee" system where TDS is transferred on the same day as the payment.

Late Deposit — What Happens?

If TDS is deposited after the due date, the deductor must pay interest on the late amount.

Interest under Section 201(1A):

• For non-deduction: 1% per month (or part of a month) from the date on which TDS was deductible to the date of actual deduction
• For late deposit after deduction: 1.5% per month (or part of a month) from the date of deduction to the date of actual deposit

Example: Sunrise Retail deducts ₹5,620 TDS in April. Deposits it on 20 May instead of 7 May.

• Delay: 13 days (but even 1 day beyond due date = 1 full month charged)
• Interest: ₹5,620 × 1.5% × 1 month = ₹84.30 (rounded to ₹85)

Interest paid is not deductible as a business expense — it is purely a cost of non-compliance.

Consequences of Non-Deduction — Section 40(a)(ia)

If TDS is not deducted at all on a payment that requires it:

1. Disallowance: The entire gross payment is disallowed as a business expense under Section 40(a)(ia). This inflates taxable income by the gross amount.

2. Exception (30% partial disallowance from FY 2014-15): Even if TDS was not deducted, if the payee has included the income in their own tax return and paid tax on it, the deductor can claim the expense. The disallowance is reduced to 30% of the payment.

3. Practical impact: For a company paying 25% tax, a ₹45,000 professional fee with TDS not deducted leads to:

   • Full disallowance: ₹45,000 added back
   • Additional tax: ₹45,000 × 25% = ₹11,250
   • Whereas TDS that should have been deducted: ₹4,500
   • Net cost of oversight: ₹11,250 − ₹4,500 = ₹6,750 extra tax

TDS Returns — Form 24Q and Form 26Q

TDS deducted must be reported to the government through quarterly returns. There are two main forms:

Form 24Q — Salary TDS Return

• Covers: TDS deducted under Section 192 (salary)
• Filed by: Any employer who has deducted TDS from salary
• Contents: Employer's TAN and PAN, each employee's PAN, monthly salary paid, TDS deducted per employee, challan details (BSR code, date, serial number, amount)
• Quarters: Q1 (Apr–Jun), Q2 (Jul–Sep), Q3 (Oct–Dec), Q4 (Jan–Mar)

Form 26Q — Non-Salary TDS Return

• Covers: TDS deducted under all sections except 192 — 194C, 194J, 194H, 194I, 194A, 194B, and others
• Filed by: Any deductor who has deducted non-salary TDS
• Contents: Deductor's TAN and PAN, payee's PAN, nature of payment (section code), amount paid, TDS deducted, challan details

TDS Return Due Dates

Q4 has a late deadline (15 May) to allow deductors time to complete March-end TDS adjustments and deposit the final TDS by 30 April before filing.

Late Filing Penalty — Section 234E

Late filing of TDS return attracts a mandatory fee of ₹200 per day of delay, subject to a maximum of the TDS amount. This is not a penalty that can be waived — it is a fee automatically levied and must be paid before the return is accepted.

Example: Form 26Q for Q1 is due 15 July. If filed on 20 August (35 days late), the fee is ₹200 × 35 = ₹7,000 or total TDS amount, whichever is lower.

Penalty for Non-Filing — Section 271H

In addition to the 234E fee, the assessing officer can levy a penalty of ₹10,000 to ₹1,00,000 for failure to file a TDS return. Unlike Section 234E, this penalty is discretionary.

How to File TDS Returns — TRACES/TIN-FC

TDS returns are prepared using RPU (Return Preparation Utility) provided free by the NSDL/Protean portal, or using any TDS-enabled accounting software (Tally, Winman TDS, Genius, ClearTax TDS).

Steps to file Form 26Q:

1. Download and install RPU from tin.tin.nsdl.com
2. Enter deductor details (TAN, PAN, address)
3. Enter each payment/payee: PAN of payee, section code, amount, TDS, challan BSR code, date, challan serial number
4. Validate using File Validation Utility (FVU) — generates a validated .fvu file
5. Upload the .fvu file at TRACES portal (traces.gov.in) or TIN-FC (TIN Facilitation Centre at bank branches or authorized centres)
6. Receive provisional receipt number — return is under processing
7. Within a few days, TRACES shows "Accepted" status — final receipt number issued

Sunrise Retail Case Study — April 2025 TDS Summary

Let us consolidate all TDS deducted by Sunrise Retail in April 2025:

Deposit Schedule

All April TDS must be deposited by 7 May 2025.

Sunrise Retail will file two challans:

1. Challan for salary TDS (0192): ₹0 (no salary TDS in April)
2. Challan for non-salary TDS: Split by section or combined — total ₹9,120
   • 194C: ₹220
   • 194J: ₹4,500
   • 194H: ₹900
   • 194I(b): ₹3,500

In Tally, the entry will be:

TDS Payable A/c    Dr  ₹9,120
   To Bank A/c         ₹9,120

[Challan ITNS 281 — dated 5 May 2025, BSR code, serial number entered]

Q1 Return Filing

All Q1 (April–June) TDS is reported in Form 26Q by 15 July 2025. Sunrise Retail's accounts team will use their accounting software or the NSDL RPU to prepare and upload the return, listing each payment made in April, May, and June with the corresponding challan details.

Practice Exercises

Key Terms

Next up: Module 6 — Certificates and TRACES — how to download Form 16 and Form 16A from TRACES, what 26AS and AIS contain, how Pradeep Properties reconciles its rent TDS credit, and how to resolve TRACES defaults.