Day 27: TDS in TallyPrime (Income-tax Act 2025)
✅ Today you will learn
- What changed with the Income-tax Act, 2025 (tax year, new sections and forms)
- TDS rates and thresholds for common payments
- Set up TDS in TallyPrime – company, ledgers, parties
- Record deduction and payment of TDS
- Quarterly statements and certificates
🏢 In the real world
In October 2026 Rohit renovates the shop, prints school diaries and hires an architect, and starts paying rent for a godown. Each bill is above the TDS threshold. If tax is not deducted and deposited on time, the expense can be disallowed and interest and penalty follow. Here is how an accountant handles it in TallyPrime.
The new law in one table
From 1 April 2026 the Income-tax Act, 2025 replaced the 1961 Act. The “previous year / assessment year” pair is replaced by a single tax year (tax year 2026-27 = 1 April 2026 to 31 March 2027). TDS provisions are consolidated:
| Payment | New section | Old (1961 Act) | Quarterly statement | Certificate |
|---|---|---|---|---|
| Salary | Section 392 | 192 | Form 138 (was 24Q) | Form 130 (was Form 16) |
| Other payments to residents (contractors, professionals, rent, commission…) | Section 393 | 193–194T | Form 140 (was 26Q) | Form 131 (was Form 16A) |
| TCS | Section 394 | 206C | New quarterly form (replaces 27EQ) | Form 133 (was Form 27D) |
Rates and thresholds below are as commonly published for tax year 2026-27. Finance Acts change them – confirm on the Income Tax Department website (incometaxindia.gov.in) before applying.
Common TDS rates (section 393)
| Payment (old section) | Threshold | Rate |
|---|---|---|
| Contractor – individual/HUF (194C) | ₹30,000 single bill or ₹1,00,000 in the year | 1% |
| Contractor – others (194C) | ₹30,000 single bill or ₹1,00,000 in the year | 2% |
| Professional fees (194J) | ₹50,000 in the year | 10% |
| Technical services, call centre (194J) | ₹50,000 in the year | 2% |
| Rent – land, building, furniture (194-I) | ₹50,000 per month | 10% |
| Rent – plant & machinery (194-I) | ₹50,000 per month | 2% |
| No PAN furnished by payee | — | Higher rate (generally 20%) |
Companies, firms and LLPs always; individuals and HUFs carrying on business only if their accounts were subject to tax audit (turnover above the audit limit) in the preceding year. In this lesson we assume Rohit Stationers crossed that limit last year.
TDS setup in TallyPrime
- 1F11 → Enable Tax Deducted at Source (TDS) = Yes → enter TAN, deductor type (e.g. Individual/Others), responsible person details.
- 2Create ledger TDS Payable – Contractors (and one per nature) under Duties & Taxes, type of duty/tax = TDS, with the nature of payment.
- 3Expense ledgers (Repairs & Renovation, Printing, Professional Fees, Godown Rent): Is TDS applicable = Yes with the right nature of payment.
- 4Party ledgers: Is TDS deductible = Yes, deductee type (Individual/Firm/Company) and PAN.
- 5Use a TallyPrime release updated for the Income-tax Act, 2025 so that nature-of-payment names, sections and forms match the new law.
October 2026 – deduction
| Payee | Nature | Bill (₹) | Rate | TDS (₹) | Net payable (₹) |
|---|---|---|---|---|---|
| Ramesh Kumar (contractor, individual) | Shop renovation contract | 80,000 | 1% | 800 | 79,200 |
| Shree Printers (partnership firm) | Printing of school diaries – contract | 60,000 | 2% | 1,200 | 58,800 |
| Ar. Pooja Saxena (architect) | Professional fees – store design | 60,000 | 10% | 6,000 | 54,000 |
| Mr. R. P. Singh (landlord) | Godown rent for October | 55,000 | 10% | 5,500 | 49,500 |
| Particulars | Debit | Credit | |
|---|---|---|---|
| Dr | Repairs & Renovation | 80,000 | |
| Cr | Ramesh Kumar | 79,200 | |
| Cr | TDS Payable – Contractors Section 393 – contractor, individual @ 1% | 800 | |
| Total | 80,000 | 80,000 |
TDS is deducted when the amount is credited to the party’s account or paid, whichever is earlier. Booking the bill is the credit – so deduct then, not later at payment.
Payment and returns
| Particulars | Debit | Credit | |
|---|---|---|---|
| Dr | TDS Payable – Contractors | 2,000 | |
| Dr | TDS Payable – Professional | 6,000 | |
| Dr | TDS Payable – Rent | 5,500 | |
| Cr | SBI Bank | 13,500 | |
| Total | 13,500 | 13,500 |
- Deposit TDS by the 7th of the next month (March deductions: by 30 April).
- File the quarterly statement (Form 140 for non-salary payments) – generally by 31 July, 31 October, 31 January and 31 May.
- Issue certificates (Form 131) to payees after filing; they check credit in their annual tax statement.
- In TallyPrime: TDS reports show the challan reconciliation and the quarterly statement data; export it for the return preparation utility.
Solved examples
Example 1: Professional fees and rent
| Particulars | Debit | Credit | |
|---|---|---|---|
| Dr | Professional Fees | 60,000 | |
| Cr | Ar. Pooja Saxena | 54,000 | |
| Cr | TDS Payable – Professional 10% – professional services | 6,000 | |
| Total | 60,000 | 60,000 |
| Particulars | Debit | Credit | |
|---|---|---|---|
| Dr | Godown Rent | 55,000 | |
| Cr | Mr. R. P. Singh | 49,500 | |
| Cr | TDS Payable – Rent 10% – rent above ₹50,000 per month | 5,500 | |
| Total | 55,000 | 55,000 |
Practice exercises (unsolved – answer hidden)
Try each exercise on paper or in TallyPrime first, then open the answer to check.
🏋️ Practice – do it yourself
Show solution
Yes. The aggregate ₹1,05,000 crosses ₹1,00,000 in the year, so TDS @ 2% applies to the whole aggregate: ₹2,100 (deduct on the bill that crosses the limit, covering the earlier bills too).Show solution
The higher rate (generally 20%) instead of 10%: ₹12,000. Collect PAN to avoid this.🏅 Job skills unlocked today
Quick quiz
🧠 Quick Quiz – test yourself
Interview corner
💼 Interview Corner
When is TDS deducted – on payment or on credit?
At the time of credit to the payee’s account or payment, whichever is earlier. Booking the bill counts as credit.
What changed for TDS with the Income-tax Act, 2025?
Sections were consolidated (392 salary, 393 other TDS, 394 TCS), “tax year” replaced previous/assessment year, and forms were renumbered (e.g. Form 138/140 for quarterly statements, Form 130/131 certificates). Most rates and the basic mechanism continue.
Summary
- Income-tax Act, 2025: sections 392 (salary), 393 (other TDS), 394 (TCS); “tax year”.
- Contractors 1%/2%, professionals 10%, rent of building 10% (check thresholds).
- Deduct on credit or payment, whichever is earlier; deposit by the 7th.
- October total TDS ₹13,500; quarterly Form 140, certificate Form 131.
Day 28: payroll in TallyPrime – employees, pay heads, PF, ESI and salary slips.
Frequently Asked Questions
Does TallyPrime already have the new sections?
Is TDS applicable on GST amount?
Tally and TallyPrime are trademarks of Tally Solutions Pvt. Ltd. This is an independent course, not affiliated with or endorsed by Tally Solutions. All business names, GSTINs and figures in the examples are fictional samples.
