TDS (Tax Deducted at Source)
TDS is tax the payer withholds from a payment and deposits with the government on the payee's behalf. When you pay a vendor for eligible expenses, you keep back a small percentage, pay the vendor the net, and remit the withheld amount to the department — then report it quarterly. Raya works out the section, the rate and the amount on the bill, posts the withholding leg for you, and builds the return.
This page covers the sections Raya supports, a fully worked §194Q example (bill → journal → challan → Form 26Q), and how per-party TDS policy controls when deduction happens.
Sections Raya supports
Each section covers a nature of payment, with its own rate and annual threshold. Below the threshold, no TDS is due; once crossed, TDS applies to the payments as described for that section.
| Section | Nature of payment | Typical rate | Threshold (per FY) |
|---|---|---|---|
| 194A | Interest other than on securities | 10% | ₹5,000 (₹40,000 / ₹50,000 for banks) |
| 194C | Payments to contractors / sub-contractors | 1% (Ind/HUF) · 2% (others) | ₹30,000 single · ₹1,00,000 aggregate |
| 194H | Commission or brokerage | 5% | ₹15,000 |
| 194I | Rent — plant & machinery / land, building, furniture | 2% / 10% | ₹2,40,000 |
| 194J | Professional or technical fees | 10% (2% technical) | ₹30,000 |
| 194Q | Purchase of goods | 0.1% on value over ₹50 lakh | ₹50,00,000 cumulative |
:::caution Rates and thresholds are configurable defaults The values above are Raya's shipped defaults under Settings → Tax & Compliance → TDS. Rates and thresholds change with each Finance Act — confirm the current figures for your year before relying on them. Raya applies whatever is configured, per section. :::
:::note Salary and TCS are separate Salary TDS (§192) is handled by payroll and correctly stays out of Form 26Q. Tax you collect on sales — TCS under §206C(1H) — is a different return, Form 27EQ. Where a purchase attracts both §194Q (buyer deducts) and §206C(1H) (seller collects), §194Q takes precedence and the seller need not collect. :::
PAN missing — §206AA higher rate
If a vendor has no valid PAN, §206AA requires deduction at the higher rate — generally 20%, or 5% for §194Q. Raya flags the party and applies the §206AA rate automatically until a valid PAN is on record.
Lower / nil deduction certificates (§197)
A vendor may hold a §197 certificate allowing a lower or nil rate. Enter the certificate number, rate and validity/limit on the party record. Raya then applies the reduced rate and caps it at the certificate's amount limit — reverting to the normal rate once the limit or validity is exhausted.
Per-party TDS policy
Each vendor's TDS behaviour is set on the party record (it also flows onto purchase orders and bills). The policy decides whether Raya deducts on a bill:
| Policy | Behaviour |
|---|---|
| No | Never deduct for this party. |
| Charge | Always deduct at the party's default section and rate. |
| Ask | Prompt on each bill whether to deduct. |
| Auto | Raya decides from the section thresholds and the party's year-to-date totals — deduct only once a threshold is crossed. Use this for §194Q. |
:::tip Set it once Set the default section (e.g. 194J for a consultant, 194C for a contractor) and the policy on the party record. Every bill and payment for that vendor then inherits it — you just confirm on the bill. :::
Worked example — a bill that crosses the §194Q threshold
§194Q applies to buyers whose turnover exceeded ₹10 crore in the preceding year. It requires 0.1% TDS on the purchase of goods from a vendor, on the value exceeding ₹50 lakh in the financial year. TDS is computed on the value excluding GST.
The numbers
Assume your turnover last year was above ₹10 crore, so §194Q applies, and the vendor's TDS policy is Auto.
| Item | Amount |
|---|---|
| Vendor | Acme Polymers (PAN on record, policy = Auto) |
| Purchases from Acme already booked this FY (taxable) | ₹48,00,000 |
| This bill — taxable value | ₹8,00,000 |
| This bill — GST @18% (intra-state, CGST + SGST) | ₹1,44,000 |
| This bill — total | ₹9,44,000 |
| Cumulative taxable after this bill | ₹56,00,000 |
| §194Q threshold | ₹50,00,000 |
| Value crossing the threshold (₹56L − ₹50L) | ₹6,00,000 |
| TDS @0.1% on ₹6,00,000 | ₹600 |
Only the ₹6,00,000 that sits above ₹50 lakh is charged — the ₹2,00,000 of this bill that took the running total from ₹48L to ₹50L is not.
Filling the TDS panel on the bill
-
Record the purchase bill as usual (Purchase → Bills → ＋ New Bill, or from the PO) — vendor, taxable value ₹8,00,000, GST 18%.
-
Because the policy is Auto and the cumulative crosses ₹50 lakh, the TDS panel activates and pre-selects section 194Q. It shows:
Field Value Section 194Q YTD purchases (before this bill) ₹48,00,000 Threshold ₹50,00,000 Taxable value in excess ₹6,00,000 Rate 0.1% TDS amount ₹600 Net payable to vendor ₹9,43,400 -
Review the figures and confirm. (If the vendor had no PAN, Raya would apply the §206AA rate of 5% here instead of 0.1%.)
-
Save the bill.
The journal Raya posts
Dr Purchase / Cr AP net of TDS / Cr TDS Payable — the vendor is credited with the bill
minus the tax you kept back:
Dr Purchases 8,00,000
Dr Input CGST @9% (ITC) 72,000
Dr Input SGST @9% (ITC) 72,000
Cr Vendor — Acme Polymers 9,43,400
Cr TDS Payable (194Q) 600
---------------------
9,44,000 9,44,000 ✓ balanced
The vendor ledger now shows ₹9,43,400 owing (not ₹9,44,000) — you'll pay them the net, and the ₹600 is parked in TDS Payable until you deposit it.
Paying the vendor
When you settle the bill, pay the net:
Dr Vendor — Acme Polymers 9,43,400
Cr Bank 9,43,400
Depositing the TDS challan
TDS withheld in a month must be deposited by the 7th of the following month (the department's due date). In Raya:
- Go to Finance → TDS → Challans → ＋ New Challan.
- Select the section (194Q) and period — Raya totals the withheld amounts sitting in TDS Payable for that section and month (here, ₹600 plus any other 194Q deductions).
- Record the bank payment and enter the challan / CIN details returned by the bank.
Raya posts:
Dr TDS Payable (194Q) 600
Cr Bank 600
TDS Payable for the period is now nil, and the deduction is linked to its challan — which is what the return needs.
Generating Form 26Q
Form 26Q is the quarterly return for non-salary TDS. Because every deduction was stamped with its section and linked to a challan, the return is already built:
- Go to Finance → TDS → Form 26Q Export and pick the quarter.
- Raya lists every deduction — party, PAN, section, amount, and the linked challan — with any missing-PAN or unlinked-challan rows flagged.
- Export the return file for upload / filing.
- Issue Form 16A to the vendor as the deduction certificate — download one from a deduction under Finance → TDS → Deductions, or batch-download all from the Form 26Q Export page.
:::tip Reconcile before you file Check that every deduction is linked to a challan and every party has a valid PAN before exporting. Unlinked deductions or missing PANs are the usual causes of a 26Q mismatch — Raya surfaces both on the export screen so you can fix them first. :::
Related
- Vouchers — the TDS Quick-fill and the double-entry grid.
- GST, e-Invoice & e-Way Bill — returns, TCS (27EQ) and RCM.
- Chart of Accounts — the TDS Payable and Input GST ledgers.
- GST & compliance overview
- Purchase Orders — where a vendor's TDS policy flows onto the bill.