Accounts Payable | Line-Item TDS

TDS at the line. Mixed bills don't round wrong any more.

Different lines on the same vendor bill often fall under different TDS sections. 194C for the contractor part, 194J for the consultancy part. Line-item TDS resolves the section, rate and threshold per line, with PAN verified live against CBDT. No FY-end surprises, no manual recomputation.

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How TDS gets applied today

Bill-level TDS rounds wrong on most real-world bills.

A single vendor invoice often has lines that fall under different TDS sections. The contractor invoice carries a small consultancy line. The professional services bill carries a reimbursable. Bill-level TDS picks one section and rounds. The result:

194J consultancy lines on a 194C bill get under-deducted. The vendor's TDS certificate doesn't tie back to your books at FY-end.
194Q vs 206C(1H) decision skipped on goods purchases above ₹50L. Recovered as an FY-end disallowance.
Section 197 lower-deduction certificates expire mid-quarter. The bill posted on day one of the next FY uses the wrong rate.
Surcharge and cess applied flat instead of per the vendor's PAN status (resident vs non-resident, individual vs firm).

TDS gets reconciled at FY-end with a fortnight of CA back-and-forth. Not because the rules are unclear, but because the tooling treats the bill as a single tax event when it is actually six.

How it works

Line-level TDS, applied at capture.

Step 01

Line classified, not bill classified

Each line on the captured bill is assigned a TDS section (194C, 194J, 194I, 194Q, 194O), a rate and an applicable threshold based on its description, GL coding and vendor type.

Step 02

PAN verified live with CBDT

The vendor's PAN is checked against the Income Tax Department's PAN status API at capture. Active or inoperative status drives the surcharge and cess applied.

Step 03

Section 197 LDC checked at the line

Vendors with a lower-deduction certificate have the certificate's section, rate and validity loaded. The rate at the line respects the certificate, not the default.

Step 04

FY threshold tracker drives the cut-over

Section thresholds (₹30K for 194J, ₹1L for 194C, ₹50L for 194Q) tracked per vendor and section across the FY. The line where the threshold breaches is the line where deduction starts.

Step 05

24Q, 26Q, 27Q drafted from the lines

Quarterly returns drafted directly from the line-level TDS register. Form 16A bulk-generated and DSC-signed at FY-end.

What the system does

Capability, input, output.

Capability	Input	Output
Section + rate engine	Line description + GL + vendor type	Section, rate and threshold per line
Live PAN check	Vendor PAN	Active or inoperative; surcharge bucket
LDC handling	Cert section + rate + validity dates	Override at line per cert window
194Q vs 206C(1H)	Buyer + seller turnover history	Auto-resolve which side deducts or collects
FY threshold tracker	Per-vendor, per-section YTD totals	Threshold-breach flag at the line
Mixed-section bill	Multi-line invoice with different GLs	Multi-section TDS computed per line
Quarterly return draft	Posted bills + challans + corrections	24Q / 26Q / 27Q in CBDT-prescribed format
Form 16A generation	Quarterly returns + DSC	Bulk PDFs signed and emailed to vendors

Section + rate engine

Input

Line description + GL + vendor type

Output

Section, rate and threshold per line
Live PAN check

Input

Vendor PAN

Output

Active or inoperative; surcharge bucket
LDC handling

Input

Cert section + rate + validity dates

Output

Override at line per cert window
194Q vs 206C(1H)

Input

Buyer + seller turnover history

Output

Auto-resolve which side deducts or collects
FY threshold tracker

Input

Per-vendor, per-section YTD totals

Output

Threshold-breach flag at the line
Mixed-section bill

Input

Multi-line invoice with different GLs

Output

Multi-section TDS computed per line
Quarterly return draft

Input

Posted bills + challans + corrections

Output

24Q / 26Q / 27Q in CBDT-prescribed format
Form 16A generation

Input

Quarterly returns + DSC

Output

Bulk PDFs signed and emailed to vendors

Compliance + integrations

TDS is line-level under the Income Tax Act.

Most products treat it as a bill-level adjustment because that's easier to build, not because it's correct. Every section, rate and threshold here is applied where the law requires it: at the line.

Regulations we work within

Sections 194C / 194J / 194I

Section assigned per line, with the right rate and threshold for each.
Section 194Q + 206C(1H)

Buyer/seller turnover histories cross-checked to resolve which side deducts vs collects.
Section 195

Foreign-vendor TDS with DTAA rate lookup; Form 15CA/15CB metadata captured for remittance.
Section 197 LDC

Lower-deduction certificate (section, rate, validity) loaded per vendor and applied at the line.
Section 200(3) + Rule 31A

Quarterly returns (24Q, 26Q, 27Q) drafted in CBDT-prescribed format.
Section 203 + Rule 31

Form 16A bulk-generated, DSC-signed and emailed to vendors per quarter.

Connects to

CBDT (Income Tax) Live PAN status, TRACES upload, Form 16A
NSDL Challan validation
Tally Prime Bidirectional sync
Zoho Books Native connector
SAP Business One Native connector

Line-Item TDS FAQ

What buyers ask.

How does the system decide 194C vs 194J on the same bill?

The line description, the GL it posts to, and the vendor's primary service category drive the default. Rules are configurable per organisation; the AP team can override at the line with a reason captured in the audit trail. The CA can review section logic before quarterly filing.

What about the 194Q vs 206C(1H) overlap?

Section 194Q (buyer deducts at 0.1% on goods purchases above ₹50L per FY per seller) and 206C(1H) (seller collects at the same kind of transaction) overlap. The system reads both buyer and seller turnover history and applies whichever section the law assigns. If the buyer is liable to deduct under 194Q, 206C(1H) is automatically suppressed.

We get a Section 197 LDC mid-quarter. Does it apply to bills already posted?

No. The LDC applies prospectively from its effective date. The system loads the certificate, applies the lower rate to bills posted from the effective date forward, and flags any bills posted before that fall in the certificate's window for review. Retrospective application is a manual decision.

PAN inoperative. What happens to the deduction rate?

Section 206AA + 206AB combined: an inoperative PAN attracts the higher of (a) 20% or (b) double the normal rate. The system picks up the inoperative status from the live CBDT check at capture, applies the higher rate, and surfaces a vendor follow-up task to get the PAN reactivated.

Foreign vendor with a Section 195 deduction. Does the system handle Form 15CA/CB?

Yes. Foreign vendors are tagged at the master with their TRC and DTAA position. Section 195 is applied at the bill (DTAA rate where TRC is on file, slab rate otherwise). Form 15CA Part D / Form 15CB metadata is captured at the bill and drafted for CA review and bank submission.

Our CA reviews TDS posture before each filing. How does that flow work?

CA reviewer access is read-only across line-level TDS classifications, threshold breaches, LDC application and the drafted quarterly returns. Comments and DSC sign-off are captured per quarter. Filing only happens after sign-off is recorded.

Related features

Bill goes in. Right TDS comes out, at the line.

Connect one entity, free. The next bill gets section + rate per line, PAN status checked live, threshold tracker started. Your CA gets a review screen, not a spreadsheet.