TAN Registration and TDS Filing Guide for New Companies in India
Every newly incorporated company in India must obtain a TAN (Tax Deduction and Collection Account Number) and comply with TDS obligations from the date of its first deductible payment. Whether you pay salaries, rent, contractor invoices, or professional fees - TDS applies, and the deduction, deposit, and return filing deadlines are non-negotiable. A single missed deadline triggers automatic penalties starting at ₹200 per day under Section 234E, interest at 1% to 1.5% per month under Section 201(1A), and potential prosecution under Section 276B. This guide covers the complete TAN registration process through Form 49B, TDS rates across all major sections, deposit deadlines, quarterly return filing (Forms 24Q, 26Q, 27Q), penalty provisions, and how to apply for a lower deduction certificate - everything a new company needs to stay compliant from day one.
- TAN is mandatory for every company before making its first TDS-liable payment - apply via Form 49B on the NSDL-TIN portal
- TDS must be deposited by the 7th of the following month using Challan 281 (March deductions by April 30)
- Quarterly TDS returns: Form 24Q (salary), Form 26Q (non-salary residents), Form 27Q (NRI payments)
- Late filing penalty: ₹200/day under Section 234E, capped at the total TDS amount in the return
- Non-deduction attracts 1% monthly interest; non-deposit attracts 1.5% monthly interest plus prosecution risk
- Payees expecting lower tax liability can obtain a lower deduction certificate under Section 197 using Form 13
What is TAN and Why Does Every Company Need One?
TAN (Tax Deduction and Collection Account Number) is a unique 10-character alphanumeric identifier allotted by the Income Tax Department under Section 203A of the Income Tax Act. It is issued to every person who is required to deduct tax at source (TDS) or collect tax at source (TCS). The format follows a specific pattern - for example, DELH12345A - where the first three characters represent the jurisdiction code (DEL for Delhi), the fourth character is the initial of the deductor's name, followed by five numeric digits and one alphabetic check character.
For a newly registered Private Limited Company, TAN is not optional. The moment your company makes a payment that attracts TDS - whether it is the first salary to an employee, the first rent cheque to a landlord, or the first invoice payment to a contractor - you must have a valid TAN. Without it, you cannot legally deduct TDS, file TDS returns, or issue Form 16/16A certificates to payees. Quoting TAN is mandatory on all TDS challans, returns, certificates, and correspondence with the Income Tax Department. Failure to apply for TAN attracts a penalty of ₹10,000 under Section 272BB.
Many new companies delay TAN application until their first TDS return is due. By that point, they have already made multiple payments without deducting TDS - triggering interest under Section 201(1A) on every missed deduction. Apply for TAN immediately after incorporation, alongside your PAN, GST, and professional tax registrations.
How to Apply for TAN: Form 49B Process
TAN is obtained by filing Form 49B, the prescribed application form for allotment of TAN. The application can be submitted online through two authorized portals: the NSDL-TIN portal (tin-nsdl.com) or the UTIITSL portal (utiitsl.com). Online applications are processed faster and are the recommended method for companies.
Step-by-Step Online Application
- Visit the NSDL-TIN portal and select "Online Application for TAN (Form 49B)"
- Select category as "Company" from the deductor type dropdown
- Enter company details: legal name (as per the Certificate of Incorporation), date of incorporation, PAN of the company, registered office address, and contact details of the responsible person
- Provide the Assessing Officer code - this is the ward/circle under whose jurisdiction the company's TAN will fall, typically based on the registered office location
- Upload supporting documents: proof of identity (Certificate of Incorporation), proof of address (registered office proof), and PAN card copy of the company
- Pay the processing fee of ₹65 plus applicable GST (currently 18%, making the total approximately ₹77) through net banking, debit card, or demand draft
- Submit the application and note the 14-digit acknowledgment number for tracking
Documents Required
| Document | Purpose | Accepted Format |
|---|---|---|
| Certificate of Incorporation | Proof of identity and legal existence | Scanned copy (PDF/JPEG) |
| PAN Card of the Company | Cross-verification of identity | Scanned copy (PDF/JPEG) |
| Registered Office Proof | Address verification for jurisdiction mapping | Utility bill, lease deed, or NOC |
| Board Resolution | Authorizing TAN application | Signed copy on company letterhead |
Processing takes 7 to 15 business days from the date of successful submission. The TAN allotment letter is sent to the registered address, and the TAN is also reflected on the NSDL-TIN portal for online verification. Once allotted, the TAN must be quoted on all TDS-related documents from the very first deduction.
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Start Company RegistrationTDS Sections Every New Company Must Know
Different types of payments attract TDS under different sections of the Income Tax Act, each with its own rate and threshold. A new company typically encounters 5-7 TDS sections within the first year of operations. The table below covers the most common sections, their applicable rates, and the threshold limits that trigger the deduction obligation.
| Section | Nature of Payment | TDS Rate | Threshold (₹/year) |
|---|---|---|---|
| 192 | Salary | As per income tax slab rates | Basic exemption limit |
| 194A | Interest (other than on securities) | 10% | ₹40,000 (₹50,000 for senior citizens) |
| 194C | Payment to contractors | 1% (individual/HUF), 2% (others) | ₹30,000 single / ₹1,00,000 aggregate |
| 194H | Commission or brokerage | 5% | ₹15,000 |
| 194I | Rent - plant, machinery, equipment | 2% | ₹2,40,000 |
| 194I | Rent - land, building, furniture | 10% | ₹2,40,000 |
| 194J | Professional fees | 10% | ₹30,000 |
| 194J | Technical services (certain payees) | 2% | ₹30,000 |
| 194Q | Purchase of goods | 0.1% | ₹50,00,000 |
| 195 | Payment to non-residents (NRIs/foreign companies) | As per rates in force or DTAA | No threshold - all payments |
Key Points on TDS Rates
- PAN not furnished: If the payee does not provide a valid PAN, TDS is deducted at the higher of the prescribed rate, 20%, or the rate in force - under Section 206AA
- Section 206AB - Higher rate for non-filers: If the payee has not filed income tax returns for the last two years and the aggregate TDS/TCS in each year exceeds ₹50,000, TDS is deducted at twice the prescribed rate or 5%, whichever is higher
- GST component: TDS is deducted on the invoice value excluding GST, provided the GST amount is shown separately on the invoice
- Section 195 - NRI payments: Any payment to a non-resident attracts TDS regardless of amount. The rate depends on the nature of payment and the applicable Double Taxation Avoidance Agreement (DTAA). Consult a tax professional before making cross-border payments
In the first year, most new companies deal primarily with Section 192 (salary), Section 194C (contractors and vendors), Section 194I (office rent), and Section 194J (CA, lawyer, and consultant fees). Set up your accounting system to auto-detect these payment types and calculate TDS before making any vendor payment.
When to Deduct TDS: Timing Rules
TDS must be deducted at the earlier of two events: the date of credit to the payee's account in the books of the deductor, or the date of actual payment. This "earlier of credit or payment" rule applies across all TDS sections except salary (Section 192), where TDS is deducted at the time of actual payment.
Practical Examples
- Office rent: If rent of ₹50,000 for June is credited to the landlord's account on June 30 but paid on July 5, TDS must be deducted on June 30 (date of credit)
- Contractor invoice: If a contractor submits an invoice on March 15 and it is booked (credited) in March but paid in April, TDS is deducted in March when the credit entry is passed
- Salary: TDS is deducted only when salary is actually paid. If March salary is paid on April 7, TDS is deducted in April
Getting the timing right is critical because the TDS deposit deadline and the applicable quarter for return filing both depend on the month of deduction, not the month of payment. A wrong deduction month cascades into late deposit interest and return filing mismatches.
TDS Deposit Deadlines and Challan 281
After deducting TDS, the company must deposit the deducted amount with the central government using Challan ITNS 281. The deposit is made electronically through the Income Tax e-filing portal, net banking of authorized banks, or through the OLTAS (Online Tax Accounting System) portal. The deadlines are strict and uniform across all TDS sections.
| Month of TDS Deduction | Deposit Deadline | Applicable Challan |
|---|---|---|
| April to February (any month except March) | 7th of the following month | Challan 281 |
| March | April 30 | Challan 281 |
| Government deductors | Same day as deduction | Book entry / Challan 281 |
How to Fill Challan 281
When depositing TDS through Challan 281, enter the following details accurately:
- TAN of the deductor (your company's TAN)
- Assessment year - for deductions made in FY 2025-26, the assessment year is 2026-27
- Type of payment: Select TDS (not TCS, unless collecting tax at source)
- Section code: Enter the applicable section (e.g., 194C for contractor payments, 194I for rent)
- Nature of payment: Company deductees (0020) or non-company deductees (0021)
- Amount of TDS being deposited
After successful payment, note the BSR code (7-digit bank branch code), challan serial number, and date of deposit. These three details are required when filing the quarterly TDS return and must match the bank records exactly. A mismatch will cause the return to fail validation.
Missing the 7th-of-the-month deadline triggers interest at 1.5% per month under Section 201(1A) - calculated from the date of deduction to the date of actual deposit. Even a one-day delay counts as a full month. For ₹1,00,000 TDS deposited 2 months late, the interest is ₹3,000 (₹1,00,000 × 1.5% × 2 months). This interest is not waivable.
TDS Return Filing: Forms 24Q, 26Q, 27Q, and 27EQ
After deducting and depositing TDS, the company must file quarterly TDS returns with the Income Tax Department. Each return covers a specific quarter and a specific type of deduction. Returns are filed electronically through the Income Tax e-filing portal or through authorized intermediaries using the FVU (File Validation Utility) software provided by NSDL.
Types of TDS Returns
| Form | Covers | Filed By | Frequency |
|---|---|---|---|
| Form 24Q | TDS on salary (Section 192) | All employers deducting TDS on salary | Quarterly |
| Form 26Q | TDS on non-salary payments to residents (194A, 194C, 194H, 194I, 194J, etc.) | All deductors making non-salary payments to residents | Quarterly |
| Form 27Q | TDS on payments to non-residents and foreign companies (Section 195) | Deductors making cross-border payments | Quarterly |
| Form 27EQ | Tax Collected at Source (TCS) under Section 206C | Sellers/collectors responsible for TCS | Quarterly |
Most new companies file Form 24Q (if they have salaried employees) and Form 26Q (for vendor, rent, and professional fee payments) every quarter. Form 27Q is required only if the company makes payments to non-residents, and Form 27EQ only if the company collects TCS on specified goods or services.
Information Required in TDS Returns
- TAN and PAN of the deductor (company)
- PAN of each deductee (payee) - missing PAN triggers higher TDS rates under Section 206AA
- Challan details: BSR code, challan serial number, date of deposit, and amount for each challan used
- Deductee-wise breakup: amount paid, date of payment/credit, TDS deducted, TDS deposited, and section code
- For Form 24Q (Q4): Annexure II with salary breakup, exemptions, and tax computation for each employee
TDS returns are prepared using the RPU (Return Preparation Utility) provided by NSDL or third-party TDS return filing software. The return file must pass the FVU validation before upload. Common errors include PAN mismatches, challan amount discrepancies, and incorrect section codes - all of which are flagged during validation.
Quarterly TDS Return Due Dates
TDS returns are filed on a quarterly basis. The due dates are fixed by the Income Tax Rules and apply uniformly to all deductors (with a minor variation for government deductors in Q4). Missing these dates triggers the automatic late filing fee under Section 234E.
| Quarter | Period | Due Date (Non-Government) | Due Date (Government) |
|---|---|---|---|
| Q1 | April 1 - June 30 | July 31 | July 31 |
| Q2 | July 1 - September 30 | October 31 | October 31 |
| Q3 | October 1 - December 31 | January 31 | January 31 |
| Q4 | January 1 - March 31 | May 31 | March 31 |
After successful filing, the CPC-TDS (Centralized Processing Cell for TDS) processes the return and generates a provisional receipt with a token number. If any defaults are found - such as late filing, short deduction, or short payment - the CPC-TDS issues a demand notice under Section 200A. It is crucial to reconcile the TDS return data with Form 26AS of each deductee to ensure credits appear correctly.
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File TDS Returns with IncorpXPenalties for TDS Non-Compliance
TDS penalties in India operate on a four-tier structure: late filing fees, interest for delayed deduction or deposit, penalties for non-deduction, and penalties for incorrect returns. Each tier is triggered independently, and multiple penalties can apply simultaneously to the same default. The table below summarizes every penalty provision a new company must know.
| Default | Provision | Penalty / Interest | Cap / Limit |
|---|---|---|---|
| Late TDS return filing | Section 234E | ₹200 per day of delay | Total TDS amount in the return |
| Late TDS deduction | Section 201(1A) | Interest at 1% per month | No cap - accrues until deduction |
| Late TDS deposit | Section 201(1A) | Interest at 1.5% per month | No cap - accrues until deposit |
| Non-deduction of TDS | Section 271C | Penalty equal to TDS amount | Equal to TDS not deducted |
| Late/incorrect TDS return | Section 271H | ₹10,000 to ₹1,00,000 | At discretion of AO |
| Non-deposit of deducted TDS | Section 276B | Prosecution: 3 months to 7 years imprisonment | Criminal prosecution |
| Failure to apply for TAN | Section 272BB | ₹10,000 penalty | One-time penalty |
Section 234E - Late Filing Fee (Automatic)
The most common penalty for new companies is the Section 234E late filing fee. It is computed automatically by the CPC-TDS system - there is no manual discretion. If a TDS return due on July 31 is filed on August 15, the late filing fee is ₹200 × 15 days = ₹3,000. However, this amount cannot exceed the total TDS reported in that return. If the total TDS in the return is ₹2,500, the late filing fee is capped at ₹2,500.
Section 271C - Non-Deduction Penalty
This is a more severe penalty imposed when the deductor completely fails to deduct TDS on a liable payment. The penalty equals the amount of TDS that should have been deducted. If your company paid ₹5,00,000 to a contractor without deducting the required 2% TDS (₹10,000), the penalty is ₹10,000 on top of the interest and the TDS amount itself. This penalty is levied by the Joint Commissioner after issuing a show-cause notice.
Section 276B - Criminal Prosecution
The most serious consequence applies when TDS is deducted from the payee but not deposited with the government. This is treated as misappropriation of government revenue. Section 276B prescribes rigorous imprisonment ranging from 3 months to 7 years along with a fine. Directors and officers responsible for the company's TDS compliance can be personally prosecuted. This provision underscores why timely TDS deposit is the single most important compliance obligation for any company.
Beyond penalties, there is a direct income tax cost for TDS non-compliance. Under Section 40(a)(ia), if TDS is not deducted or not deposited on time, 30% of the expenditure is disallowed as a business expense. This increases the company's taxable income and, consequently, its tax liability. For a ₹10,00,000 contractor payment with missed TDS, the disallowance is ₹3,00,000 - resulting in additional tax of approximately ₹78,000 at the 25% corporate tax rate plus surcharge and cess.
Lower or Nil TDS Deduction Certificate: Section 197
Not every payment requires TDS at the full prescribed rate. If a payee's total income for the financial year is expected to be below the taxable limit, or if the payee's tax liability will be significantly lower than the TDS being deducted across all sources, the payee can apply for a lower or nil TDS deduction certificate under Section 197 of the Income Tax Act.
Application Process
- Log in to the Income Tax e-filing portal (incometax.gov.in) using the payee's PAN credentials
- File Form 13 electronically, providing estimated income for the financial year, details of all TDS deductions expected, projected tax liability, and details of the deductors from whom lower deduction is requested
- The Assessing Officer (AO) reviews the application and, if satisfied, issues a certificate specifying a lower TDS rate or a nil rate
- The payee furnishes this certificate to the deductor (your company), and you deduct TDS at the rate mentioned in the certificate instead of the standard rate
When Is Section 197 Relevant for New Companies?
As a deductor, your company encounters lower deduction certificates when vendors, consultants, or contractors furnish them along with their invoices. You must verify the certificate details - validity period, applicable sections, and the maximum amount covered - before applying the lower rate. Deducting at the full rate despite receiving a valid certificate is not an offence, but it creates cash flow problems for the payee and potential disputes.
If your company is the payee - for example, receiving interest from a bank on a fixed deposit while your total income is below the taxable limit - you can apply for a Section 197 certificate to prevent TDS on the interest income. This is particularly useful for newly incorporated companies in their first year of operations when expenses exceed revenue.
TDS Compliance Checklist for New Companies
Maintaining TDS compliance involves a recurring monthly and quarterly cycle. Below is a structured checklist that every newly incorporated company should implement from the first month of operations.
One-Time Setup
- Apply for TAN via Form 49B immediately after company incorporation
- Register on the Income Tax e-filing portal using the company's TAN
- Set up TDS-compliant accounting software with auto-calculation for all applicable sections
- Collect PAN from all vendors, landlords, employees, and consultants before making the first payment
- Appoint a responsible person or engage a Virtual CFO for monthly TDS oversight
Monthly Cycle (Every Month)
- Identify all payments subject to TDS and verify applicable section and rate
- Deduct TDS at the time of credit or payment, whichever is earlier
- Deposit TDS via Challan 281 by the 7th of the following month
- Record BSR code, challan serial number, and deposit date for return filing
- Reconcile deductions with payee invoices and PAN details
Quarterly Cycle
- Prepare and file Form 24Q (salary TDS) by the quarterly due date
- Prepare and file Form 26Q (non-salary TDS) by the quarterly due date
- File Form 27Q if any payments were made to non-residents during the quarter
- Download and verify Form 26AS for each deductee to confirm credits
- Issue Form 16A (non-salary TDS certificate) to payees within 15 days of the return due date
Annual Cycle (After March 31)
- File Q4 TDS returns by the applicable due date (May 31 for Form 24Q and 26Q)
- Issue Form 16 (annual salary TDS certificate) to all employees by June 15
- Reconcile total TDS deducted, deposited, and reported in returns with the company's books of accounts
- Respond to any CPC-TDS notices for short deduction, late filing, or demand under Section 200A
- File correction returns if any errors are identified in originally filed returns
- Ensure all TDS data reconciles with the annual income tax return of the company
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Get TDS Compliance SupportCommon TDS Mistakes New Companies Make
TDS compliance errors are among the most frequent reasons new companies receive income tax notices. Most mistakes are avoidable with basic awareness and proper systems. Here are the errors that account for the majority of TDS-related notices and penalties.
- Not deducting TDS on rent: Companies paying office rent above ₹2,40,000 per year must deduct TDS under Section 194I. Many startups operating from co-working spaces or rented offices miss this obligation, especially when paying rent to individual landlords
- Incorrect section code: Classifying a payment under the wrong TDS section - such as treating professional fees (194J at 10%) as contractor payments (194C at 2%) - leads to short deduction notices and demand for the differential amount plus interest
- Missing the 7th-of-month deadline: Even a single day's delay in TDS deposit triggers the 1.5% monthly interest. Companies that process payments in bulk at month-end often deposit TDS late because they start the payment process after the 7th
- Not collecting PAN from payees: Without a valid PAN, TDS must be deducted at 20% instead of the normal rate. Companies that forget to collect PAN from small vendors and then deduct at the normal rate face short deduction notices
- Ignoring Section 194Q: Companies with turnover exceeding ₹10 crore must deduct TDS at 0.1% on purchase of goods exceeding ₹50 lakh from a single seller. This relatively new section catches many growing companies off guard
- Not filing nil returns: If TDS was deducted in any month of a quarter, the return must be filed - even if the total amount is small. Some companies skip filing for quarters with minimal TDS, not realizing that the Section 234E late filing fee applies regardless of the TDS amount
TDS Under the Income Tax Act, 2025: What Changed?
The Income Tax Act, 2025, which replaces the Income Tax Act, 1961, came into effect from April 1, 2026. While the fundamental TDS framework remains intact, the section numbers have changed. For companies that were compliant under the old act, the transition is largely a renumbering exercise. However, new companies incorporating after April 2026 should familiarize themselves with the updated section references.
| Old Section (1961 Act) | New Section (2025 Act) | Nature of Payment |
|---|---|---|
| 192 | Section 392 | Salary |
| 194A | Section 393(4) | Interest other than on securities |
| 194C | Section 393(1) | Payment to contractors |
| 194I | Section 394 | Rent |
| 194J | Section 393(6) | Professional/technical fees |
| 194Q | Section 393(5) | Purchase of goods |
| 195 | Section 395 | Payment to non-residents |
| 197 | Section 397 | Lower deduction certificate |
The TDS rates, thresholds, deposit deadlines, and return filing procedures remain substantively the same under the new act. The penalty framework has also been carried forward with equivalent provisions. Companies using TDS software should ensure their systems are updated to reflect the new section numbers for returns filed from FY 2026-27 onward.
For detailed guidance on the transition from the old act to the new act, refer to our comprehensive comparison in the income tax return filing guide.
