A TDS return filing audit reconciles Form 24Q (salary) and Form 26Q (non-salary) for each quarter against the general ledger population of payments subject to TDS, testing that every payment attracting TDS was actually deducted, that the rate applied matches the applicable section for that nature of payment and the deductee's PAN status, that the quarterly return was filed within the due date, and that the TDS deducted and deposited agrees to the credit reflected in the deductee's Form 26AS where that cross-check is available.
Completeness: payments that should have attracted TDS
- Build an independent population of payments from the purchase and expense ledgers that fall under sections requiring deduction — professional fees, contractor payments, rent, commission, interest — and compare it to what was actually reported in Form 26Q, rather than starting from the return and checking only what is already there.
- Pay particular attention to payments booked under a general or miscellaneous expense head, since these are the ones most likely to have been deducted under the wrong section or missed entirely.
- Check for payments to a non-resident that should have gone through section 195 deduction and the related Form 15CA/15CB process rather than being treated as a domestic payment.
Rate correctness and filing timeliness
| Check | Evidence | What it catches |
|---|---|---|
| Rate applied vs section | Vendor master, nature-of-payment classification | Lower rate applied to a payment type attracting a higher rate, or vice versa |
| PAN-linked higher rate | Vendor PAN status, Form 26Q PAN field | Deduction at the normal rate for a vendor without a valid PAN, where a higher rate should apply |
| Quarterly filing due date | Return acknowledgment, filing date | Late filing fee exposure and corresponding interest on late deposit |
| Return-to-books agreement | Form 24Q/26Q totals, TDS payable ledger | A return total that nets correctly while individual entries within it are wrong |
Regulatory requirement
TDS rates, the threshold for higher deduction where PAN is not furnished or linked, and quarterly due dates are prescribed under the Income Tax Act and revised periodically. Confirm the rates and dates applicable to the period under audit.
How we think about this
Matching a payment to the right TDS section and rate is a lookup that a rules engine applies consistently across every vendor and every quarter. Deciding whether a payment that doesn't fit neatly into any TDS category — a reimbursement, say, that might really be a disguised fee — is deduction-worthy is the judgement call that belongs to the auditor.
This is practical guidance written for audit teams, not an authoritative statement of any standard or statute. Standards, forms and timelines change. Check the current text issued by the ICAI and the relevant authority before relying on anything here in an audit file.
Related resources
- Payroll & employee costTDS on salary: audit testing approachRecomputing TDS for a sample against the declared regime, matching to Form 24Q, and reconciling TDS deducted to deposited and to the payroll register.
- Purchase & AP auditPurchase invoice vouching: a practical approachWhat to examine on a purchase invoice, in what order, the tickmarks worth using, and how to record the test so a reviewer can tell what was checked without asking.
- Purchase & AP auditVendor reconciliation in statutory auditHow to select vendors for confirmation, the seven categories every difference falls into, how to handle non-responses, and what an unconfirmed balance is worth.
- CARO & Companies ActCARO statutory dues clause: testing approachHow to test timely deposit of statutory dues for CARO reporting, handle disputed dues disclosure, and avoid redoing work already done in the GST and payroll sections.
Free tools, no signup
Each one reads a file entirely in your browser — or, for two of them, just answers a few questions — and nothing is ever uploaded.
- Purchase register checkDuplicate payments, round-sum amounts, weekend-dated invoices, incomplete records.
- GSTR-2B reconcilerMatches your purchase register against GSTR-2B — missing invoices either side, amount mismatches.
- Bank reconciliation checkerMatches your cash book against a bank statement — what's outstanding on each side.
- Fixed asset register checkDuplicate asset codes, missing location or useful life, negative net book value.
- CARO applicability checkerAnswer a few questions about the company and see which CARO 2020 clauses likely apply.
- MSME payment delay checkerMSME-flagged invoices paid — or still unpaid — beyond the 45-day Section 22 limit.
- Related-party transaction screenerTransactions above a threshold you set with no approval reference, grouped by counterparty.
- Depreciation useful life checkerCompares a useful life in use against the Schedule II, Part C indicative figure.
- Materiality calculatorOverall and performance materiality against PBT, revenue, assets or equity, with reasoning shown.
- Sample size calculatorStatistical sample size for a test of controls or a substantive test of detail.