2nd Quarter TDS Return Due Date: Avoid Penalties, Founders’ Guide

Key Takeaways

• The 2nd quarter TDS return due date is 31 October, covering TDS deducted in July, August, and September
• Forms to file: Form 24Q for salary, Form 26Q for non-salary resident payments, Form 27Q for non-resident payments, Form 27EQ for TCS
• TDS deposit deadlines within Q2: 7 August for July, 7 September for August, 7 October for September
• Late filing fee: ₹200 per day under Section 234E, capped at the total TDS amount for the quarter
• Penalty for non-filing: ₹10,000 to ₹1,00,000 under Section 271H if the return is not filed within one year of the due date
• Filing is done on TRACES using RPU and FVU utilities downloaded from TIN NSDL

What Is Q2 In TDS, And What Does The July September TDS Return Cover?

India’s income tax financial year runs April to March and is divided into four quarters for TDS compliance purposes. This structure is defined under Rule 31A of the Income Tax Rules, 1962:

• Q1: April to June
• Q2: July to September, this post’s focus
• Q3: October to December
• Q4: January to March

The July September TDS return captures every rupee of TDS you deducted across those three months. If you paid a consultant in August, rent in July, or a contractor in September, the TDS on all those payments is reported in the single Q2 return.

This applies to every category of deductor, private limited companies, LLPs, partnership firms, proprietorships under tax audit, government offices, trusts, and associations of persons. If your entity holds a TAN and made qualifying payments during July to September, Q2 is your filing window.

The 2nd Quarter TDS Return Due Date, And All Four Quarter Deadlines In One View

The 2nd quarter TDS return due date is 31 October, set under Rule 31A of the Income Tax Rules. Here is the full quarterly calendar so you can plan the year in one view:

A few important nuances:

• The deadline is for filing the return, not depositing the TDS. Deposit deadlines are earlier and separate, covered in the next section.
• If 31 October falls on a public holiday or Sunday, CBDT may issue a circular with an extension, or the next working day applies. Always verify the CBDT notification for that specific year before assuming an extension. For FY 2025–26, the Q2 due date is 31 October 2025.
• Government deductors generally face the same external filing deadlines for quarterly returns.

One thing founders often miss, the Q2 TDS return deadline is not just about salary. If your firm paid freelancers, a logistics aggregator, or a cloud reseller through local partners, those payments often attract TDS under different sections, all reportable by 31 October.

TDS Deposit Due Dates Within Q2, Before You Can Even File The Return

TDS deposit and TDS filing are two separate compliance actions. You cannot report TDS in a return until it has been deposited with the government.

The monthly TDS deposit rule requires TDS deducted in any month to be deposited by the 7th of the following month, except for March, where the deadline extends to 30 April.

TDS is deposited via Challan ITNS 281 on the Income Tax portal or through an authorised bank. The challan generates a BSR code, challan date, and serial number, all required when filing the Q2 return.

Government deductors that use challans follow the same 7th of the month rule. Government deductors that use book entry must deposit on the same day as deduction.

If you deposit late, interest under Section 201(1A) applies:

• 1% per month, or part of a month, for failure to deduct TDS at all, calculated from the date it was deductible to the date it was actually deducted
• 1.5% per month, or part of a month, for deducting TDS correctly but depositing it late, calculated from the date of deduction to the date of deposit caclubindia.com

A common mistake among founders, deducting TDS on time but holding the cash and depositing it a month later. The deduction is correct, but the deposit is late, and the 1.5% per month interest runs from day one. On ₹5 lakh of TDS, that is ₹7,500 per month in pure interest expense.

Which TDS Return Form To File For Q2, 24Q, 26Q, 27Q, Or 27EQ?

The form you file depends on the nature of the payment. Here is the complete map:

Most Indian startups and SMEs will file both Form 24Q and Form 26Q every quarter. If you have employees, 24Q is mandatory. If you pay vendors, contractors, consultants, landlords, or others above specified thresholds, 26Q applies. For payroll execution, see Form 24Q.

Form 27Q is relevant only if your business makes payments to NRIs or foreign contractors. A SaaS company paying a US-based designer or a Dubai-based advisor needs to file 27Q.

Form 27EQ is for TCS, not TDS. TCS is collected by the seller, not deducted by the buyer. If your business buys scrap or sells certain specified goods, 27EQ may apply, but it is a separate compliance track from TDS.

All forms are filed electronically. Paper filing is not permitted for companies, government offices, deductors required to get accounts audited under Section 44AB, or deductors with 20 or more deductees. Reference, incometaxindia.gov.in.

Penalties For Missing The Q2 TDS Return Due Date

The penalty structure for TDS non-compliance has three distinct layers. They can all apply simultaneously.

Section 234E, Late Filing Fee

• ₹200 per day for every day of delay after the due date
• Starts from 1 November if the Q2 return is not filed by 31 October
• Capped at the total TDS amount for the quarter
• Mandatory and system calculated

On a quarter where you deducted ₹2 lakh in TDS, a 30 day delay costs ₹6,000 in Section 234E fees alone. A 60 day delay costs ₹12,000.

Section 271H, Penalty For Non Filing

• Minimum ₹10,000, maximum ₹1,00,000
• Triggered if the return is not filed within one year of the due date
• Also triggered by substantial errors, incorrect PAN, incorrect challan details, material misstatements
• Applies in addition to Section 234E fees

Section 201(1A), Interest On Late Deduction Or Deposit

• 1% per month from the date TDS was deductible to the date it was actually deducted
• 1.5% per month from the date of deduction to the date of deposit

Section 40(a)(ia), Expense Disallowance

If TDS is not deducted or not deposited on time, 30% of the related expense is disallowed in your income tax computation.

Example: Pay ₹5,00,000 in agency fees without deducting TDS, 30% or ₹1,50,000 is disallowed, raising taxable profit. At a 25% corporate tax rate, that adds ₹37,500 in tax, on top of interest and penalties.

The Q2 due date of 31 October is not a soft deadline. Every day past it adds measurable cost.

How To File The Q2 TDS Return, Step By Step Process

Step 1, Download The RPU, Return Preparation Utility

Go to the TIN NSDL portal and download the Return Preparation Utility. It is a free Java based tool. NSDL updates it periodically, so always download the latest version. Download separate RPUs for 24Q and 26Q if you are filing both.

Step 2, Prepare The Return Data

Open the RPU and enter the following for each challan and each deductee:

• TAN of the deductor
• PAN of every deductee
• Challan details: BSR code, challan date, challan serial number, and amount deposited
• Nature of payment, section code: 192 salary, 194C contractors, 194J professional and technical fees, 194I rent, 194H commission, 194A interest
• TDS deducted and TDS deposited amounts for each deductee

Every field must match exactly what appears in your OLTAS challan records on the Income Tax portal. Any mismatch will fail validation.

Step 3, Validate Using The FVU, File Validation Utility

Download the File Validation Utility from NSDL and run your prepared return file through it. If validation passes, it generates a .fvu file. If it fails, fix the flagged errors in RPU and validate again.

Step 4, Upload On TRACES

Log in to TRACES using your TAN credentials and upload the .fvu file. Alternatively, file through an authorised e TDS intermediary or a tax professional who has TRACES access.

Step 5, Receive Your Provisional Receipt Or Token Number

The system generates a token number as confirmation of upload. Keep this number to track processing status and to file correction statements if needed.

Step 6, File Corrections If Needed

If you find an error after filing, submit a correction statement on TRACES. The original return must be in Accepted status before a correction is permitted. Some fields can be corrected online, others require a fresh RPU based correction file.

Common Mistakes That Cause Q2 TDS Returns To Be Rejected Or Penalised

• Wrong or missing PAN of the deductee. This is the number one cause of rejection and deductee credit issues in Form 26AS.
• Challan mismatch. Even a one digit error in BSR code, challan date, or serial number causes validation failure or post upload rejection.
• Short deduction. Using the wrong rate, for example 2% instead of 10% where 194J applies, triggers demand and interest.
• Wrong quarter attribution. Deduction in September and deposit in October still belongs in Q2, not Q3.
• Outdated RPU version. New RPUs fix formats and checks. Old versions often fail FVU silently or at upload.
• Ignoring lower or nil deduction certificates. Apply Form 13 rates where issued, not standard rates.
• Skipping a NIL return when no TDS was deducted. If your TAN is active, check whether a NIL return is required to avoid non compliance flags.

Who Must File A Q2 TDS Return, Are You Obligated?

Under Section 200(3) of the Income Tax Act, every person who deducts TDS must file a quarterly return. The category of deductor covers:

• All companies, private limited, public limited, and one person company
• All partnership firms and LLPs
• Individuals and HUFs whose business accounts were audited under Section 44AB in the preceding financial year
• Government offices at central and state level
• Trusts, AOPs, and BOIs when they make specified payments above thresholds

Note for solopreneurs and small founders: If your professional receipts crossed ₹50 lakh in the prior year and you underwent tax audit, you are a deductor from the current year onward. Obtain a TAN via Form 49B on the NSDL portal before deducting.

After Filing, Form 16A And What Your Vendors And Employees See

Filing the Q2 return triggers downstream obligations to issue TDS certificates.

• Form 16A for non salary TDS under 26Q must be issued by 15 November for Q2.
• Form 16 for salary TDS under 24Q is annual, due by 15 June following the financial year.

Once processed by TRACES, deductees see TDS credit in Form 26AS and the Annual Information Statement on the Income Tax portal. Late or incorrect filing means their credit may not appear in time, creating disputes and revised returns, which come back to your team to resolve.

If any error surfaces after filing, submit correction statements on TRACES for PAN corrections, amount adjustments, and challan updates. Correct promptly to avoid extended Form 26AS mismatches.

Handle This Without The Headache

Tracking monthly deposits, preparing RPUs for 24Q and 26Q, validating with FVU, and hitting the 31 October deadline requires a system. If this is pulling you away from the business, Virtual Accounting by AI Accountant handles full TDS compliance, including deductions, deposits, quarterly returns, and Form 16A issuance, starting at ₹4,000 per month.

FAQ

What Exactly Is The Q2 TDS Return Deadline, And What Months Does It Cover?

The Q2 TDS return due date is 31 October of the same financial year. It covers TDS deducted in July, August, and September.

Is The TDS Deposit Date The Same As The Filing Date For Q2?

No. Deposit and filing are separate. Deposit by the 7th of the following month for each deduction month in Q2, then file the quarterly return by 31 October.

Which Forms Do I Actually Need To File For Q2 As A Startup Founder?

Most startups file Form 24Q for salary TDS and Form 26Q for non salary resident payments. Add Form 27Q only if you paid non residents. Form 27EQ is for TCS and is separate.

What Happens If I Miss The 31 October Deadline, Can I Fix It Later Without Penalties?

If you miss the deadline, Section 234E fees of ₹200 per day start from 1 November and continue until you file, capped at the quarter’s TDS. If you still have not filed within one year, Section 271H adds a penalty between ₹10,000 and ₹1,00,000. If this sounds heavy, consider Virtual Accounting by AI Accountant to stay on top of dates and filings.

How Do I Calculate Interest If I Deposited TDS Late In August Or September?

For late deposit after deduction, apply 1.5% per month, or part of a month, from the date of deduction to the date of deposit under Section 201(1A). If you failed to deduct at all, apply 1% per month from the date it was deductible to the date you actually deducted and then deposited.

Do I Still Need To File A Q2 Return If I Did Not Deduct Any TDS In That Quarter?

If your TAN is active, check whether a NIL return is expected for Q2. Skipping it can flag non compliance in TRACES. A quick confirmation with your CA prevents avoidable notices.

We Paid A Foreign Contractor In August, Which Form Applies And What Else Should I Watch?

Payments to non residents require Form 27Q. Ensure correct section codes, applicable DTAA rate where eligible, accurate PAN if available, or applicable rate without PAN, and timely deposit before including it in your Q2 return.

My Team Entered The Wrong BSR Code For A September Challan, How Do We Correct It?

File a correction statement on TRACES after the original return shows Accepted status. Update challan details, BSR code, date, and serial number. Most such corrections can be submitted online, complex ones may need an RPU based correction file.

What Is The Risk If We Deducted At 2% Instead Of 10% For A Professional Fee In August?

Short deduction triggers a demand for the shortfall plus interest from the date of required deduction. It can also affect the deductee’s Form 26AS credit and create reconciliation issues. File a correction and pay the differential with interest quickly.

When Do I Need To Issue Form 16A For Q2, And What If I Miss It?

Issue Form 16A for Q2 by 15 November. Delays create vendor disputes because their credit will not reconcile with Form 26AS in time for their own returns.

We Are A Small Team, Is There A Reliable Way To Outsource Q2 TDS End To End?

Yes. If you prefer to offload TDS deductions, deposits, quarterly filings, and Form 16A issuance, consider Virtual Accounting by AI Accountant. It keeps you compliant, on time, and audit ready while you focus on operations.