TDS Entry in Tally with Practical Example

Understanding TDS Entry in Tally with Practical Example is a must-have skill for accounting students, accountants, and finance professionals working in India. Tax Deducted at Source (TDS) is not just a compliance requirement—it’s a real-world accounting process that every company follows while making payments like salary, professional fees, rent, and contract payments.

In this article, we’ll break down TDS Entry in Tally with Practical Example, covering concepts, configuration, journal entries, and compliance flow—exactly how it’s done in real offices.

What is TDS?

TDS (Tax Deducted at Source) is a mechanism where tax is deducted at the time of making certain payments and deposited with the Income Tax Department on behalf of the deductee.

Common Payments Where TDS Applies:

• Salary (Section 192)

• Professional Fees (Section 194J)

• Contract Payments (Section 194C)

• Rent (Section 194I)

• Commission (Section 194H)

Why Learning TDS Entry in Tally with Practical Example is Important

Many learners know TDS theoretically, but struggle during interviews or office work because they don’t know how to pass TDS entries in Tally.

Practical knowledge helps you:

• Handle real company accounts

• Avoid TDS compliance errors

• Generate correct TDS returns (24Q, 26Q)

• Gain confidence as a job-ready accountant

That’s why mastering TDS Entry in Tally with Practical Example is crucial.

Prerequisites Before Passing TDS Entry in Tally

Before making TDS entries, ensure the following are done in Tally Prime:

1. Enable TDS in Tally

• Go to Gateway of Tally

• Press F11 (Features)

• Enable Tax Deducted at Source (TDS)

2. Create Deductor Details

• Go to Statutory & Taxation

• Enter:

  • TAN Number

  • PAN Number

  • Deductor Type

  • Address

3. Create TDS Ledger

• Under Duties & Taxes

• Select TDS

• Choose appropriate TDS nature (e.g., Professional Fees)

Practical Example of TDS Entry in Tally

Let’s understand TDS Entry in Tally with Practical Example step by step.

Example Scenario:

ABC Pvt Ltd pays ₹50,000 as professional fees to Mr. Rahul (Consultant).
TDS applicable under Section 194J @ 10%.

Calculation:

• Professional Fees: ₹50,000

• TDS @ 10%: ₹5,000

• Net Payment: ₹45,000

Step 1: Create Required Ledgers

1. Professional Fees Ledger

• Under: Indirect Expenses

• Enable TDS

• Select 194J – Professional Fees

2. Party Ledger (Mr. Rahul)

• Under: Sundry Creditors

• PAN Number mandatory

• TDS applicable: Yes

3. Bank Ledger

• Under: Bank Accounts

Step 2: Pass TDS Journal Entry in Tally

Go to:
Gateway of Tally → Vouchers → Journal (F7)

Journal Entry:

✔ This entry records expense and TDS liability.

This is the core TDS Entry in Tally with Practical Example that interviewers often ask.

Step 3: Payment Entry to Party

When payment is made to Mr. Rahul:

Go to Payment Voucher (F5)

Entry:

Step 4: TDS Payment Entry in Tally

TDS must be deposited to the government within due dates.

Go to:
Gateway of Tally → Statutory Payments → TDS

Or manually pass a payment entry:

Entry:

Step 5: TDS Return & Challan Generation

Tally allows you to:

• Generate Challan ITNS 281

• File TDS Returns (Form 26Q, 24Q)

• Generate Form 16 / 16A

This completes the full cycle of TDS Entry in Tally with Practical Example.

Common Mistakes to Avoid in TDS Entry

• Not entering PAN of deductee

• Selecting wrong TDS section

• Incorrect rate application

• Missing TDS payment due date

• Improper ledger configuration

Avoiding these mistakes makes you a reliable accounting professional.

Interview Questions Based on TDS Entry in Tally

If you know TDS Entry in Tally with Practical Example, you can easily answer:

• How do you pass TDS entry in Tally?

• Explain TDS on professional fees with example

• How to deduct and pay TDS in Tally Prime?

• What happens if PAN is not available?

Who Should Learn TDS Entry in Tally?

• Accounting & Commerce Students

• CA / CS / CMA Aspirants

• Job-seekers in Accounts & Finance

• Working Accountants

• Business Owners & MSMEs

Conclusion

Mastering TDS Entry in Tally with Practical Example transforms you from a theory-based learner into a practical accountant. It’s not just about passing entries—it’s about understanding compliance, accuracy, and real-world accounting flow.

If you want to grow in accounting, taxation, or corporate finance, start practicing TDS entries in Tally daily. That’s where real confidence is built.