TDS at source: the five withholding mistakes we see most often

Withholding is a collection mechanism: the law makes the payer the collector. When it goes wrong, the payer — not the recipient — carries the tax, the interest and the penalty. These are the five failures we meet most often.

1. Paying gross 'because the invoice says so'

An invoice amount is not a payment instruction. If the payment code attracts withholding, the net paid must be invoice less TDS, with the certificate to follow.

2. Right intention, wrong code

Consultancy, professional fees, commission and contract payments carry different rates. Choosing by habit rather than by code is the most common source of short deduction.

3. Depositing late, then forgetting the interest

A late deposit accrues interest automatically. Paying the tax without the interest leaves an open item that surfaces at assessment, years later.

4. Certificates never issued

Recipients need certificates to claim their credit. Unissued certificates damage supplier relationships and invite disputes you did not need.

5. No reconciliation, ever

TDS payable per ledger, TDS deposited per slips and TDS declared per return should agree to the rupee every quarter. Where they do not, the difference is cheap to fix now and expensive later.

Withholding errors are never discovered in the year they are made. They are discovered at assessment, with interest.