How much TDS I should deduct?

I think it is nobody's cup of tea to pay taxes, nor to deduct taxes from anybody else. But as an employeer or business person who subcontracts job or gets services from other people it is our duty to deduct taxes from them. If we don't we could be penalized as well.

For each type of payment there is a different slab and different rate of TDS (Tax Deducted at Source) we should deduct. Of course, I haven't dealt with all types of payments, and will write here only about those I know but they all share the following characteristics.

• The amount deducted in any given month from the total invoiced should be paid in the first seven days of the next month.
• If a payment is delayed to the next month (from day 8 onwards) or more months, an interest of one percent per month delayed should be paid.
• The TDS payments should be filed quarterly, within the first fortnight of the next quarter.
• Delay in filing is more heavily penalized, at Rs. 100 per day of the delay, thus it could be a very expensive delay if you were to delay filing the TDS payments for any reason.

We can take an example. Let's say you have made a payment of Rs. 25,000 to a freelance developer on the 5th of April. The TDS applicable would be for Professional Services at 10.3%. The payments and dates would be as follows:

• 5th April, Rs. 22,425 (Rs. 25,000 - 2,575 TDS).
• The Rs. 2,575 should be paid before 7th May.
• And this payment should be filed along with all other TDS payments of April, May and June before 15 July.

Imagine that for some reason, you delay the TDS payment and you do it just before 7th June. Then you will have to pay Rs. 25 extra (i.e. 1%)... If one month later Rs. 50 (i.e. 2%) and so on and so forth 3%, 4%, 5%, etc.

By the way, I have some pending comments to reply to... sorry, lately I haven't had much free time. In fact, I wrote this post while traveling on my PDA (greatly helpful devices!). But I will surely get back to that soon.