TDS calculator India — restaurants

When does a restaurant need to deduct TDS?

A restaurant is required to deduct TDS (Tax Deducted at Source) if it is a company, partnership firm, LLP, or an individual/HUF whose accounts were required to be audited in the immediately preceding financial year (i.e., turnover exceeded ₹1 crore for business). Most restaurants above a certain scale have audit obligations and therefore TDS obligations. Sole proprietors with turnover below ₹1 crore may have limited TDS obligations (primarily Section 194M for contractor/professional payments above ₹50L annually).

Non-deduction or late deduction of TDS attracts interest at 1% per month for delay in deduction and 1.5% per month for delay in deposit after deduction. Non-filing of TDS returns attracts a fee of ₹200 per day of default, capped at the TDS amount. These are significant liabilities that accumulate quickly — a ₹5L annual TDS liability delayed by 6 months costs ₹45,000 in interest.

Section 194C: contractor payments in restaurants

Section 194C is the most commonly applicable section for restaurants. It covers any payment to a contractor for carrying out work. “Work” is defined broadly and includes:

• Cleaning and housekeeping contractors — even if you pay a monthly retainer to a housekeeping agency
• Pest control services — quarterly or annual contracts with pest control companies
• Security agency — if a security company provides guards
• Event management — DJ, decorator, event coordinator for private events
• Delivery fleet on contract — if you outsource delivery to a fleet provider
• AMC contractors — AC servicing, kitchen equipment maintenance on annual contract

The rate is 1% for individual/HUF contractors and 2% for companies, firms, and co-operatives. The threshold is ₹30,000 per single payment or ₹1,00,000 in aggregate during the financial year. If the same contractor is paid ₹25,000 twice in a year (total ₹50,000), TDS is applicable from the second payment since the annual aggregate crosses ₹30,000.

Section 194I: TDS on rent — the most commonly missed

Every restaurant paying monthly rent above ₹20,000/month (₹2,40,000 annual) to a landlord is required to deduct TDS at 10% on rent payments for land, building, or furniture. This is one of the most commonly missed TDS obligations — many restaurant operators pay rent without TDS because the landlord prefers to receive full rent.

If the landlord refuses to accept rent with TDS deducted, the restaurant can pay full rent and deposit the TDS separately — the net payment to the landlord is reduced by TDS. However, in practice, many restaurants have informal arrangements where TDS is not deducted. This creates a liability that compounds over time: if discovered during an income tax assessment, the restaurant is liable for the entire TDS amount plus interest, and may be disallowed the rent expense deduction until TDS is paid.

The rate is 10% for land, building, or furniture. Plant and machinery rent is taxed at 2%. The landlord's PAN must be collected — without PAN, TDS is deducted at 20%.

Where this fits

• GST invoice builder — TDS deducted on vendor invoices should be reflected separately; the vendor's invoice amount is paid net of TDS and the TDS is deposited to the government
• Vendor ledger — track TDS deducted against each vendor in your vendor ledger to reconcile with Form 26AS and issue Form 16A
• Compliance calendar 2026 — TDS deposit (7th monthly), quarterly return (26Q) due dates appear in the compliance calendar alongside GST and labour law deadlines
• Cash book — TDS deposits are cash outflows that should appear in your cash book as "TDS deposit — Govt" line items
• P5 — Compliance pillar — full compliance guide for Indian restaurants: FSSAI, GST, TDS, labour law, FSSAI, liquor licensing, and municipal compliance