🧾 How to Setup and Use TDS Features in TallyPrime for Hassle-Free Compliance in 2025

Tax Deducted at Source (TDS) is a crucial compliance requirement for businesses under the Income Tax Act. TallyPrime offers complete automation for TDS calculation, deduction, reporting, and return generation, which simplifies your monthly and quarterly obligations.

This article walks you through the step-by-step setup, voucher creation, PAN validation, and reporting mechanism, with complete practical details.

✅ Basic Requirements to Enable TDS in TallyPrime

Make sure you have the following ready before proceeding:

• 🎯 TallyPrime installed and licensed
• 🎯 Company created with correct Financial Year and statutory details
• 🎯 PAN of the company and deductees
• 🎯 Valid email ID and mobile number for TAN registration
• 🎯 TAN registration under Income Tax Portal
• 🎯 Ledger accounts for TDS-related heads created

⚡ Quick Shortcuts

🛠️ How to Enable TDS in TallyPrime

To enable the TDS module:

1. Press F11 (Features) > F3 (Statutory & Taxation)
2. Set “Enable Tax Deducted at Source (TDS)” to Yes
3. Set the Company PAN and TAN
4. Choose applicable deduction types like professional fees, contractor, rent, etc.
5. Accept changes with Ctrl + A

📁 Master Configuration :

🎯 Create TDS Duty Ledger

• Gateway of Tally → Accounts Info → Ledgers → Create
• Name: TDS Payable – Professional Fees (or Rent, etc.)
• Under: Duties & Taxes
• Type of Duty: TDS
• Nature of Payment: As per applicable section (e.g., 194J for Professional Fees)

🎯 Create Deductee/Party Ledger

• Under: Sundry Creditors
• Enable TDS Applicable: Yes
• Provide PAN Number
• Choose Nature of Payment (automatically deducts TDS at voucher level)

💼 Recording TDS Transactions :

A. Journal Voucher for TDS Deduction

Step-by-step:

1. Gateway of Tally → Accounting Vouchers → F7 (Journal)
2. Debit Expense Account (e.g., Professional Charges)
3. Credit Party Ledger (e.g., XYZ Consultants)
4. Credit TDS Ledger (e.g., TDS Payable – Professional Fees)
5. Press Enter to auto calculate TDS

📌 Shortcut Tip: Use Alt + S to view TDS details at entry time.

B. Payment Voucher to Pay TDS to Government

1. Go to F5 (Payment)
2. Debit TDS Payable
3. Credit Bank
4. Narrate as “TDS Paid for Q1 FY2024-25 u/s 194J”

C. Advance Payments with TDS

While making advance payments, Tally will auto-deduct TDS based on configuration, and adjust it when final invoices are passed.

🧾 TDS Reports in TallyPrime

🧮 TDS Calculation Chart (Common Sections)

Section     Nature of Payment             Threshold (₹)     Rate (%) (FY 2024-25)
---------------------------------------------------------------------------------
194C        Contractor Payments           30,000/1,00,000    1%/2%
194J        Professional Fees             30,000             10%
194I        Rent of Land/Building         2,40,000           10%
194H        Commission                    15,000             5%
192         Salary                        Based on slab      As per Income

Check official rates on Income Tax Portal

🔍 Useful Tally Tips

• Always reconcile TDS Payable vs Paid monthly
• Validate deductee PAN to avoid 20% higher deduction
• Use F12 configuration to customize TDS reports
• Submit Form 26Q and 27Q quarterly using exported files
• Always check Challan Serial Number after payment

❓ Frequently Asked Questions (FAQs)

• What is the benefit of using TDS in TallyPrime?
  It helps automate TDS deduction, tracking, and return generation.
• Can I file TDS returns directly from Tally?
  No, Tally generates the e-return text file which needs to be uploaded on NSDL portal.
• What happens if PAN is invalid or not entered?
  Tally will default to 20% TDS as per income tax rules.
• How do I handle TDS on advance payments in Tally?
  Tally auto-adjusts TDS when advance and invoice are linked.
• What is the difference between Form 26Q and 27Q?
  26Q is for Indian resident payments, 27Q for non-residents.
• Can I revise TDS returns in Tally?
  Tally doesn’t support revision. It must be done via NSDL software.
• Is TDS deduction shown in party ledger?
  Yes, the net payment and TDS amount are both recorded in party ledger.
• Can I customize TDS rates in Tally?
  Yes, while configuring the nature of payment.
• Which report shows TDS liability pending?
  Use the Outstanding TDS Report under Display More Reports.
• What if I missed deducting TDS in a transaction?
  You can pass a backdated entry, but always ensure auditor confirmation.

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