TDS Compliance & Credit Claiming

Reconciliation of TDS deductions, claiming credits, and resolving mismatches.

Reconciliation of TDS Deductions, Claiming Credits, and Resolving Mismatches

Tax Deducted at Source (TDS) is a crucial aspect of business tax compliance, ensuring that taxes are collected at the point of income generation. However, mismatches in TDS deductions, incorrect credit claims, and delays in filing can lead to financial penalties and cash flow disruptions. With the Union Budget 2025-26 introducing significant updates, businesses must stay compliant with the latest TDS regulations and claim their rightful tax credits efficiently.

1. Understanding TDS Compliance for Businesses

TDS applies to various business transactions, including contractor payments, professional fees, rent, and interest income. Ensuring accurate TDS deductions and timely filing helps businesses avoid penalties and streamline their tax filings.

Transaction Type	Relevant Section	TDS Rate	Latest Budget 2025-26 Update
Professional Fees	Section 194J	7.5% (reduced from 10% for MSMEs)	Lower TDS burden for small businesses
Contractor Payments	Section 194C	1% (individuals) / 2% (companies)	TDS exemption limit increased from ₹30,000 to ₹50,000 per transaction
Rent Paid by Business	Section 194I	10% (Land & Building), 2% (Machinery)	No changes
Higher TDS for Non-Filers	Section 206AB	Twice the normal rate	Strict monitoring for non-ITR filers
Late TDS Filing Penalty	Section 271H	₹10,000 to ₹1,00,000	Increased penalty awareness
Late Fee for TDS Return	Section 234E	₹200 per day	Capped at the TDS amount payable

2. Claiming TDS Credits & Resolving Mismatches

Businesses must ensure that TDS deducted by clients/customers reflects correctly in their Form 26AS and AIS (Annual Information Statement). Any mismatch can lead to delayed tax refunds or excess tax payable.

TDS Reconciliation Steps

Verify deductions in Form 26AS and AIS before filing ITR.
Ensure correct tax treatment under Short-Term (STCG) & Long-Term Capital Gains (LTCG) tax rules.
Identify discrepancies early and file rectifications with the tax department.

3. Presumptive Taxation & TDS Credit Claiming

For businesses under the presumptive taxation scheme (Section 44AD & 44ADA), full TDS credit can now be claimed.

Section 44AD

Businesses with a turnover of up to ₹3 crores can opt for presumptive taxation, declaring profits at 6% for digital transactions and 8% for cash transactions.

Section 44ADA

Professionals with gross receipts of up to ₹75 lakhs can declare 50% of their income as profits and claim full TDS credit.

New Compliance Rules (Budget 2025-26):

Automated TDS Mismatch Alerts – Businesses will receive real-time notifications for TDS mismatches.
AI-Based TDS Refund Processing – Faster claim verification ensures quicker refunds.

4. How Tax360 Helps You Stay TDS-Compliant

TDS compliance can be complex, but our experts at Tax360 simplify the process for you.

TDS Deduction & Filing

Ensure correct TDS deductions and file quarterly TDS returns accurately.

TDS Credit Reconciliation

Identify mismatches, assist in rectifications, and help maximize refunds.

TDS Notices & Dispute Resolution

Handle tax department queries and resolve discrepancies efficiently.

Pro Tip: Ensure Form 26AS and AIS are reviewed before filing ITR to avoid tax demands or refund delays.

Get Full TDS Benefits with Tax360!

Stay compliant, claim rightful tax credits, and avoid penalties. Our expert guidance ensures seamless TDS reconciliation and hassle-free credit claims.

Talk to a TDS Expert