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Don’t Ignore These TDS Rules: Which Expenses Require Deduction (And Which Don’t) in FY 2024–25

Who Should Read This?

This blog is essential for business owners, freelancers, professionals, accountants, and company finance teams. If you make payments like rent, contractor charges, or professional fees, you must know when TDS is applicable. Ignoring these rules can lead to heavy penalties, disallowed expenses, and unwanted notices.

What Is TDS?

TDS stands for Tax Deducted at Source. It is a tax deducted by the payer before making specific payments such as salary, rent, contractor bills, commission, etc. The deducted amount is deposited to the Income Tax Department against the PAN of the recipient. Failing to deduct or deposit TDS correctly can lead to interest, penalties, and expense disallowance under the Income Tax Act.

Common Expenses Where TDS Must Be Deducted

TDS is applicable on many business-related expenses if the amount crosses a certain limit. Here are key categories where you must deduct TDS:

·        Salary payments under Section 192

·        Rent paid for office, property, or equipment under Section 194I

·        Contractor or job work payments under Section 194C

·        Fees paid to professionals like CA, lawyers, engineers under Section 194J

·        Commission or brokerage payments under Section 194H

·        Interest paid to non-banks or individuals under Section 194A

·        Payments for purchase of goods from vendors if your turnover exceeds Rs. 10 crore (Section 194Q)

·        Payments for property purchase above Rs. 50 lakh (Section 194IA)

·        Cash withdrawals above Rs. 1 crore (Section 194N)

Each section has its own threshold and TDS rate. If your payments exceed the limit, you must deduct and deposit TDS within the due date.

Expenses Where TDS Is Not Required

TDS is not applicable on the following types of payments:

·        Payments to government departments or RBI

·        Payments to parties fully exempt under the Income Tax Act

·        Reimbursement of expenses where invoice is in the client's name

·        Advances not credited to vendor account

·        GST component shown separately on the invoice

·        Personal expenses like groceries, school fees, utility bills

·        Payments to transporters who submit their PAN

·        Payments where the recipient has submitted Form 15G or 15H (if eligible)

Why You Should Not Ignore TDS Compliance

If you don’t deduct or deposit TDS correctly:

·        30 percent of your expense may be disallowed under Section 40(a)(ia)

·        Interest may be charged monthly on the shortfall or delay

·        You may receive a notice from the Income Tax Department

·        Penalties between Rs. 10,000 and Rs. 1,00,000 can be imposed

Incorrect TDS compliance can also impact your audit, funding, and credibility.

How Alliance Tax Experts Can Help

Our team ensures:

·        Proper review of your business expenses

·        Correct TDS deduction and calculation

·        Timely filing of TDS returns and challans

·        Zero non-compliance and maximum peace of mind

We help you avoid all legal hassles, disallowances, and penalties related to TDS.

Act Before It’s Too Late

The first quarter TDS return for FY 2024–25 is due soon. If you are unsure whether TDS applies to your payments, or if you want to avoid mistakes, contact Alliance Tax Experts today.

Call or WhatsApp: 9769201316
Visit: www.alltaxfin.com

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