TDS on payments in TallyBook: setup, deduction, challans and Form 26Q summary

Techardent Labs · 3 November 2026 · 4 min read

Quick answer: Enable TDS in F11, review the TDS Nature of Payments list, and mark the party ledger "Is TDS deductible" with its deductee type and default nature (F7 in ledger alteration). When you save a Payment, Purchase or Journal to that party, TallyBook opens TDS Details, works out the deduction and posts it to a TDS ledger.

TDS means you pay the party a little less than the bill and deposit the difference with the government in their name. The bookkeeping has three parts: deduct at the right rate, deposit it with a challan, and report it every quarter. TallyBook helps with all three inside your normal vouchers.

1. Turn TDS on and review the natures

Press F11 and set Enable Tax Deducted at Source (TDS) to Yes. Then Gateway → Create → TDS Nature of Payments. TallyBook starts you with common natures:

Nature of payment	Section under the 1961 Act (payments up to 31 March 2026)
Payments to Contractors	194C
Commission or Brokerage	194H
Rent of Land, Building or Furniture; Rent of Plant & Machinery	194I
Fees for Professional Services; Fees for Technical Services	194J
Interest from an Indian company	194A
Purchase of Goods	194Q

From 1 April 2026 the Income-tax Act, 2025 replaces the 1961 Act, and TDS on payments to residents sits in the tables of section 393 instead of separate 194 sections. Since version 0.2.0 each nature in TallyBook carries both: vouchers dated from 1 April 2026 use the new section (for example 393(1) Sl. No. 6(i)) and its rates, while earlier vouchers keep the 1961 section. See TDS under the Income-tax Act, 2025 for what changed.

Each nature holds a rate for individuals/HUF and for others, with and without PAN, and a Threshold/exemption limit. These are default values to review, not advice. Rates and thresholds change through Finance Acts, so check each nature against incometax.gov.in or with your CA and edit it before your first deduction.

2. Set up the party

On the party's ledger (Sundry Creditors, for example) set Is TDS deductible to Yes and fill PAN/IT No..
Save, then open it again (Alter → Ledger) and press F7 for TDS Statutory Details: Deductee type, Default nature of payment, and, if the party has a certificate, Deduct TDS at lower/zero rate with the rate and certificate number.

3. Deduct while entering the bill

Enter a Purchase, Journal or Payment to that party as usual and press Ctrl+A. Before saving, TallyBook opens TDS Details with the nature of payment pre-selected. It shows the assessable value, taxable value, TDS rate, section, any surcharge or cess, and the TDS amount. If the party is below the threshold it says so and deducts nothing. Accept with Ctrl+A.

Example: a professional's bill of ₹50,000 booked as a Journal, with an illustrative rate of 10% set on the nature:

Ledger	Debit	Credit
Professional Fees	₹50,000
Party (Sundry Creditor)		₹45,000
TDS duty ledger		₹5,000

TallyBook reduces the party's credit by the TDS and credits a TDS duty ledger, creating that ledger for you if one does not exist. If you alter the voucher later, TDS Details opens again with the earlier deduction filled in, so you can correct it.

TallyBook Payment voucher where TDS Details opens on saving — TDS is worked out when you save the voucher for a TDS-deductible party.

4. Pay, reconcile and report

Display More Reports → Statutory Reports → TDS Reports:

TDS Outstandings: what has been deducted but not yet paid. Alt+E exports CSV.
TDS Payment: lists pending deductions with their due date. Press Space on each one you are paying, then Ctrl+A (Pay). Enter Date, Bank Name, Cheque/DD No., BSR Code, Challan No., Challan Date and Branch. TallyBook creates the payment voucher.
Challan Reconciliation: F8 toggles pending and all; Alt+R records the BSR code, challan number and date once you have the challan.
Form 26Q (titled Form 140 for 2026-27): every deduction for the period with deductee, PAN (PANNOTAVBL when missing), section, amount paid, rate, tax, amount deposited and challan details. Alt+E exports CSV.

The quarterly report in TallyBook is a working summary, not the return file: it does not produce the FVU/e-TDS file, and it does not work out late fees or interest. Prepare and validate the quarterly statement with the official utility or through your CA. Fill your own TAN, deductor type and responsible person under Alt+K → TDS Deductor Details so the report header shows them. TCS works the same way when enabled in F11.

Frequently asked questions

Are the TDS rates in TallyBook up to date?

They are starting defaults. Review each nature of payment against current rules on incometax.gov.in or with your CA and edit the rates and thresholds before use.

Which vouchers trigger TDS?

Payment, Purchase and Journal vouchers that include a party marked Is TDS deductible, when TDS is enabled in F11. TDS Details opens when you create the voucher and again when you alter it.

What if the party has a lower deduction certificate?

Alter the party ledger, press F7 and set Deduct TDS at lower/zero rate with the certificate rate and number.

Can TallyBook file my TDS return?

No. It gives a quarterly summary (Form 26Q, titled Form 140 for 2026-27) and CSV export to help you or your CA prepare the return in the official utility.

Try TallyBook free. Download TallyBook for Windows, Mac or Linux. No registration and no licence fee. Coming from Tally? Start with Switching from Tally to TallyBook and read TallyPrime vs TallyBook.
Related: Payroll, PF and ESI · Bank reconciliation

TallyBook is an independent product made by Techardent Labs and is not affiliated with, endorsed by or connected to Tally Solutions Pvt. Ltd. TallyPrime and Tally are trademarks of their owner. Tax rules change often; confirm current rates, limits and due dates on the official portals or with your Chartered Accountant.