TDS (Tax Deducted at Source)
India's tax withholding mechanism where the payer deducts a percentage of the payment at source and remits it directly to the government on behalf of the payee.
Tax Deducted at Source (TDS) is a mechanism under the Income Tax Act where the party making a payment (the deductor) withholds a specified percentage of that payment and deposits it with the Income Tax Department. The deductee receives the payment net of TDS and can claim credit for the deducted amount when filing their own tax return.
TDS applies to a wide range of payments: salaries (Section 192), contractor fees (Section 194C), professional fees (Section 194J), rent (Section 194I), interest (Section 194A), and more. Each section has its own rate and threshold. Businesses must deduct TDS correctly, deposit it by the 7th of the following month, and file quarterly TDS returns (Form 24Q for salary, 26Q for non-salary).
Zoho Books handles TDS through its Tax Settings, where you configure TDS categories, rates, and threshold limits per vendor. When a payment is created, Zoho Books calculates the TDS deduction, posts the split journal entry (net payment + TDS liability), and tracks the outstanding TDS payable. Quarterly TDS certificate generation (Form 16A) is also available.
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