TDS challans: depositing withheld TDS and TCS

A TDS Challan is the record of one deposit of withheld tax: it pays one month's TDS deducted on payables, or TCS collected on receivables, of one company to the government. It sits in the middle of the cycle described in TDS & TCS. Bills, payments and invoices record the deductions in the withholding register. The challan gathers the month's undeposited deductions, Deposit Challan posts the payment from your bank, and the quarterly TDS return then reports each deduction against the challan that paid it.

Overview

Each challan covers one company, one deduction month, one nature (TDS or TCS), one payment code and one major head. It holds:

• the deductions it pays for, linked to it as allocations;
• the money: Tax Amount, Interest Amount, Late-Deduction Interest, Fee Amount and Total Amount;
• the payment evidence: Due Date, Deposit Date, Bank GL Account, and the two parts of the bank's challan identification number (CIN) you type in — Bsr Code and Challan Serial. The third part of the CIN is the tender date, which is the Deposit Date.

A challan moves through three statuses:

Only Deposited and Verified challans count in a quarterly return.

Salary TDS does not use this record. Payroll deposits it through its own statutory challans — see Statutory deductions.

When to use it

• Every month, after the month's bills, payments and invoices with TDS or TCS are posted, to pay the withheld tax by the due date.
• When a deduction was posted late and has to be added to a month's challan.
• Before computing a quarterly return, to make sure every deduction of the quarter is on a deposited challan with its CIN recorded.

How xMatix handles it

Drafting. Challans are drafted from the withholding register, not typed in. For a company and a month, xMatix takes every withholding transaction that has the status Computed, has tax greater than zero, is dated in that month and is not yet on a challan. It groups them by nature and payment code (deductions with no payment code are grouped by section code instead), and by major head:

• 0020 — Corporation Tax (Companies) when the deductee account's deductee type is a company;
• 0021 — Income Tax (Other than Companies) for everyone else.

So one payment code can correctly produce two challans in the same month. Each group goes onto the matching Draft challan for that company and month if one exists, and the challan's Tax Amount and Total Amount grow. Otherwise a new Draft challan is created with Minor Head 200 and the statutory Due Date. Drafting again later only picks up deductions not yet on a challan, so nothing is allocated twice.

What drafts them. On the shipped screens, challans are drafted in two ways:

• the Provision TDS/TCS compliance job, which drafts the previous month's challans for every company that has a TAN (see Configuration);
• the Allocate to Next Challan fix on the TDS reconciliation page, which drafts or tops up the challan for the month of one unallocated deduction.

Due date. The 7th of the month after the deduction month. March TDS is due on 30 April. March TCS stays on 7 April.

Interest. Interest is calculated only when you deposit, as of the Deposit Date, deduction by deduction:

• Late-deposit interest (Interest Amount): 1.5% per month or part of a month, counted from the month of deduction to the month of deposit, both included. It is zero for a deduction deposited on or before its due date. A deduction made after the challan's due date gets its own due date, the 7th of the month after it was deducted.
• Late-deduction interest (Late-Deduction Interest): 1% per month or part of a month, from the month of the source document to the month the tax was actually deducted. It is zero in the normal case, where tax is deducted on the document date.

While a challan is Draft, both interest fields stay at zero. The challan's Overview tab warns you when a Draft challan is past its due date.

The deposit journal. Deposit Challan posts one journal for the company:

The journal posts under the challan's Branch, or the branch of one of its deductions when the challan has none. Every allocated deduction is marked Deposited.

Prerequisites

• The company's chart of accounts has a TDS Payable (or TCS Payable) control account. To deposit with interest or a fee, it also needs an account tagged as the Interest Expense control. See Configuration.
• The month's bills, payments and invoices with TDS or TCS are posted, so their deductions are in the withholding register.
• You have paid the challan at the bank or on the portal and have its BSR code, tender date and challan serial.
• Your security profile allows the challan actions you need (see Permissions).

Procedure

Step 1 — Find the month's challans

1. Open the Finance Setup app and, under Withholding Tax (TDS), open the TDS Challan list.
2. The All TDS Challans view shows each challan's Name, company, Branch, Status, Section Code, Total Amount and Corrections. The Draft Challans view shows nature, period, section, tax and due date. Despite its name, it does not filter on status. Sort or filter Status yourself to see only Draft challans.
3. Open a challan. The Overview tab shows:
   • a warning when the challan is overdue or was deposited late;
   • a Deductions tile and tab listing every deduction the challan pays for — transaction, document, party, section, deduction date, amount, and the return it was reported in;
   • a Utilisation tile and a Used In Returns tab listing the returns that use the challan;
   • a Corrections tab once any correction has been recorded.

If the month's challans are missing, see Common problems.

Step 2 — Check the draft

1. On Period & Code, check the company's month (Period Year, Period Month), Nature, Payment Code, Major Head and Minor Head.
2. On Amounts, check Tax Amount against the Deductions tab on Overview. If a fee is payable, select Edit, enter it in Fee Amount and save.
3. On Deposit & CIN, check Due Date.

Step 3 — Pay at the bank, then record the payment details

Pay the challan through your bank or the tax portal, using the challan's major head, minor head, payment code and total. Interest is not on the draft yet, so work out what you owe for a late deposit using the rules above. Then:

1. Select Edit on the challan.
2. Under Deposit & CIN, enter the Deposit Date (the tender date), Bsr Code (the seven-digit code of the receiving bank branch) and Challan Serial (up to five digits). Optionally, choose the Bank GL Account here.
3. Save. xMatix refuses a BSR code that is not seven digits or a serial longer than five digits.

You can also record the BSR code and serial after depositing, but the Deposit Date must be on the record before Step 4. If it is empty, the deposit is dated today.

Step 4 — Deposit the challan

1. On the Draft challan, select Deposit Challan.
2. In the dialog, pick the Bank GL Account the money left from (it is prefilled if you set it in Step 3) and confirm.
3. xMatix recalculates Tax Amount from the allocated deductions, calculates both interest legs as of the deposit date, sets Total Amount, and posts the deposit journal. The challan becomes Deposited, the journal is linked to it, and every deduction on it is marked Deposited.

A challan can be deposited only once.

Step 5 — Verify the CIN against the bank's report

Before you file the quarter, confirm that the bank reported each deposit. Download the Challan Status Inquiry (CSI) file from the tax portal and compare each challan's BSR code, tender date, serial and amount with your record.

The Verify Against CSI button is on the challan, but the shipped screen has no place to supply the CSI file. Selecting it stops with an error saying the action needs the CSI file content. To record a check you made by hand, select Edit, switch on Csi Verified, set Status to Verified and save. xMatix refuses Verified unless the challan has its BSR code, deposit date and challan serial.

When the CSI matching itself runs, it reads every Deposited or Verified challan of the company that has a full CIN. It matches each file line on BSR code, tender date and serial, and on amount to within ₹1 when the line carries one. Matched challans become Verified with Csi Verified on.

Step 6 — Report the challan in the quarterly return

Compute the quarter's TDS return. Each Deposited or Verified challan becomes a challan row, and each deduction is reported against the challan that paid it. The challan's Used In Returns tab and Utilisation tile then show how much of it the returns use.

Step 7 — Record a correction made at the bank or on the portal

If the bank or the tax department corrected a deposited challan's major head, minor head, payment code, section code or CIN, the books should match. Correct Challan is the action built for this. It needs a correction reference, which the shipped screen cannot collect, so selecting it stops with an error asking for the correction reference.

What the action does when it receives one:

• it accepts only Major Head 0020 or 0021, Minor Head 200 or 400, a seven-digit Bsr Code, a Challan Serial of up to five digits, a Payment Code, a Section Code and the Deposit Date — never amounts;
• it refuses a Draft challan ("edit a Draft directly") and a correction that changes nothing;
• it adds one to Corrections, stores the reference in Last Correction Ref, and appends the old and new values to the Corrections tab;
• when the BSR code, serial or deposit date changed on a Verified challan, it switches Csi Verified off and sets the challan back to Deposited, so the corrected CIN must be verified again;
• it reports the Filed returns that quote the challan. Each of those needs a correction statement — see TDS returns. Returns that are not yet filed pick up the new values the next time you compute them.

Until it can run on your screens, record the correction with Edit. This writes no correction log, so keep the bank's acknowledgement with your records.

Fields

Period & Code

Amounts

Deposit & CIN

The Related tab lists the challan's related records, including its deposit journal.

Every field is described in the TDS Challan reference.

Business rules

• Saving refuses: a Nature other than TDS or TCS; a Period Month outside 1–12; a Major Head other than 0020 or 0021; a negative tax, interest, late-deduction interest or fee; a Bsr Code that is not seven digits; a Challan Serial that is not up to five digits; a Status other than Draft, Deposited or Verified; and Verified without a BSR code, deposit date and challan serial.
• When a challan is saved for the first time, empty fields default: Nature TDS, Major Head 0021, Minor Head 200, Status Draft, amounts zero, and Due Date from the period.
• Deposit Challan runs only on a Draft challan that has no deposit journal. It needs a bank account, at least one allocated deduction and a tax total above zero.
• Depositing marks every allocated deduction Deposited.
• Saving a challan with Edit is not locked by status. A Deposited or Verified challan's amounts, status and CIN can still be changed by anyone with edit permission. Only the actions keep amounts fixed. See Permissions.
• There is no reverse action: once deposited, the journal stays posted.
• Creating a challan with New is switched off in the shipped setup. Challans come from drafting.

Example

A services company deducts TDS on September's contractor and rent bills. On 1 October the scheduled compliance job drafts two challans for September: one under major head 0021 for individual contractors (tax ₹48,000) and one under 0020 for a company landlord (tax ₹12,000). Both are due on 7 October.

The accountant opens the 0021 challan and checks the Deductions tab: 14 deductions totalling ₹48,000. The payment is made on 6 October. The accountant selects Edit and enters Deposit Date 6 October, Bsr Code 0004321 and Challan Serial 00117, then selects Deposit Challan and picks the current account. No interest is due, so the journal debits TDS Payable ₹48,000 and credits the bank ₹48,000. The challan becomes Deposited.

The 0020 challan is paid on 9 October, two days late. Its deductions were made in September, so the late-deposit interest covers September and October: 2 months × 1.5% × ₹12,000 = ₹360. The total is ₹12,360. Deposit Challan debits TDS Payable ₹12,000 and Interest Expense ₹360, and credits the bank ₹12,360.

At quarter end, after comparing both CINs with the portal's CSI file, the accountant marks both challans Verified and computes the Q2 return.

Training

Practice exercise

In a sandbox company that has a TAN, a TDS Payable control account and one posted bill with TDS dated last month:

1. Have an administrator run the Provision TDS/TCS compliance job for last month.
2. Open the TDS Challan list and find the new Draft challan. Confirm its Deductions tab lists your bill's deduction and Tax Amount equals the bill's TDS.
3. Edit the challan: set Deposit Date to its due date, Bsr Code to any seven digits and Challan Serial to any five digits.
4. Select Deposit Challan and pick a bank account.

Expected result: the status is Deposited, Interest Amount is 0, the Related tab shows the deposit journal, and the bill's withholding transaction shows Deposited. Run the job again: no second challan appears.

Quick reference

• One challan = one company, month, nature, payment code and major head.
• Challans are drafted by the compliance job or the reconciliation page, not with New.
• Re-drafting only adds deductions not yet on a challan.
• Enter Deposit Date before Deposit Challan; it is the interest cut-off.
• Interest: 1.5% a month late deposit, 1% a month late deduction, months counted inclusive.
• Late deposits need an Interest Expense control account.
• Only Deposited and Verified challans reach the return.
• Verified needs BSR code, deposit date and serial.
• Edit is not locked after deposit — restrict it.

Permissions

The challan buttons are server actions that a security profile grants one by one: Deposit Challan, Verify Against CSI, Correct Challan, Prepare Monthly Challans, plus Edit, Delete, Generate Challan and Print Challan. The shipped standard-user and system-administrator profiles include all of them. The shipped sales-executive profile includes only Edit, Delete, Deposit Challan and Correct Challan. A user whose profile lacks an action cannot run it. A user without the Finance Setup app does not reach the challans at all. See why a user can't see something.

Because Edit can change a deposited challan's amounts and status, give it — and Delete — only to the people who own TDS compliance. See security profiles.

Configuration

• Control accounts. Deposit Challan debits the company's TDS Payable (TCS Payable for TCS) control account and, for interest and fees, its Interest Expense control account. Enabling finance with a chart template creates the payable controls but does not tag an Interest Expense account. Tag one before the first late deposit. Posting matches the stored value InterestExpense without a space. See GL accounts for how control types are stored and set.
• Payable override. To post one challan against a different payable account, set PayableGL Account Id on it before depositing.
• Company TAN. The compliance job drafts challans only for company accounts that carry a TAN.
• Deductee type. The vendor's or customer's deductee type decides the major head. Classify companies correctly before the month is drafted.
• Monthly compliance job. Provision TDS/TCS compliance (Finance category) drafts the previous calendar month's challans and creates the quarter's Draft return headers for every company with a TAN. You can start it manually with a month and year to catch up an earlier month. It runs automatically only when your organisation has a schedule set up for it. It never duplicates a challan or a return.
• Numbering. Challan numbers come from the document-name setting for TDS Challan: series CHLN, a date and a six-digit counter.
• Record page. The shipped view puts the TDS Overview widget on the first tab; it works on TDS Challan and TDS Return layouts. See design a form layout.
• Adding Prepare Monthly Challans to the page. The action exists but is not on the shipped record header. If an administrator adds it to the challan view's header actions, running it on a challan drafts or tops up that challan's company and month.
• Buttons that do nothing. In the shipped setup, Generate Challan on the list opens an empty dialog whose Save only closes it, and Print Challan opens an empty dialog. Use the challan record and your bank's receipt instead.

Common problems

There are no challans for last month

Challans are drafted by the compliance job or the reconciliation page, not with New. Check that the job ran for that month and that the company account has a TAN. Check also that the deductions exist: only withholding transactions with status Computed and tax above zero, dated in that month, are drafted.

A late bill's deduction is not on the challan

Run the compliance job again for that month, or use Allocate to Next Challan on the TDS reconciliation page. Either one tops up the Draft challan. If the month's challan is already deposited, a new Draft challan is created for the late deduction.

One month produced two challans for the same payment code

The deductees mix companies and others, so the deductions go under two major heads. Both challans are correct; pay each one under its own head.

"Only a Draft challan can be deposited."

The challan is already Deposited or Verified, or it already has a deposit journal. There is nothing to deposit again.

"Challan needs a bank GL account to pay from."

Pick the Bank GL Account in the Deposit Challan dialog, or set it on the challan with Edit.

"Challan has no allocated transactions." or "Challan tax amount must be greater than zero."

The challan has no deductions on it. This happens to a challan created by hand. Draft challans from the register instead.

"No TDS Payable control account … is configured."

The company has no account tagged TDS Payable (or TCS Payable). Tag one, or set PayableGL Account Id on the challan. See GL accounts.

"No Interest Expense account … is configured"

The deposit is late, or there is a fee, and no account is tagged as the Interest Expense control. Tag one and deposit again.

Verify Against CSI or Correct Challan stops with an error

On the shipped screens these actions cannot receive the CSI file or the correction reference. Follow the manual steps in Step 5 and Step 7.

The return says a deduction is not deposited

Its challan is still Draft, or the deduction is on no challan. Deposit the challan, then compute the return again.

Common questions

Why is the interest zero on my draft?

Interest depends on the date you pay, so xMatix calculates it only when you select Deposit Challan, as of the challan's Deposit Date. Until then Interest Amount and Late-Deduction Interest stay at zero. The challan's Overview tab warns you when a Draft challan is past its due date, so you can see that interest is building up. If you pay late, work out the interest with the rules on this page before you pay at the bank. The deposit then posts the same figures.

Can I change the amount after depositing?

Not through the challan actions: the deposit journal is posted and Correct Challan never changes amounts. The record itself is not locked, so a user with Edit permission can still overwrite the fields. That does not change the posted journal, though, and the challan would then disagree with your books. Treat amount mistakes as a matter for your tax advisor and the bank, and restrict Edit to the people who own TDS compliance.

Does a challan cover more than one company or month?

No. Each challan belongs to one company and one deduction month, and drafting never mixes them. Within that month, deductions are split by nature, payment code and major head. A company that deducts both TDS and TCS, or has both company and non-company deductees, therefore gets several challans for the same month. Each is deposited and verified on its own.

Where do I deposit salary TDS?

Not here. Salary TDS is computed and deposited by payroll through its own statutory challans, together with the other payroll deductions. The salary TDS return reads those payroll challans. See Statutory deductions and Income tax in payroll.

Related topics

• TDS & TCS — the full withholding cycle and one-time setup.
• TDS returns — reporting deposited challans in the quarterly statement.
• TDS reconciliation — books, returns and challans tie-out and its fixes.
• GL accounts — control accounts for posting.
• Tax Center troubleshooting
• TDS Challan reference