TDS Filing for Restaurant Owners: AY 2026-27 Guide

A restaurant owner may need to deduct tax at source (TDS) from employee salaries, rent, contractor bills, professional fees and certain other payments. For TDS filing by a restaurant owner for AY 2026-27, the relevant financial year is FY 2025-26, from 1 April 2025 to 31 March 2026. This guide explains the applicable TDS sections, deduction rates, deposit dates, quarterly return deadlines, Form 16A requirements and penalties.

TDS filing for restaurant owners AY 2026-27: Key dates first

Restaurant owners must deposit TDS within the prescribed time and file quarterly statements using the correct form. The main deadlines for TDS return filing for FY 2025-26 for a restaurant business are:

Quarter	Period	TDS payment due date	TDS return due date
Q1	April to June 2025	7 July 2025	31 July 2025
Q2	July to September 2025	7 October 2025	31 October 2025
Q3	October to December 2025	7 January 2026	31 January 2026
Q4	January to March 2026	30 April 2026	31 May 2026

For TDS deducted from payments made in March, the deposit deadline is generally 30 April. For other months, the payment deadline is generally the 7th day of the following month. Government offices follow separate deposit procedures.

The Income Tax Department provides the statutory provisions and compliance services through the official Income Tax e-Filing portal.

Which restaurant payments attract TDS?

The correct TDS section depends on the nature of the payment and the recipient. A restaurant should review every recurring expense rather than deducting TDS only from large invoices.

Common payments requiring review include:

• Employee salaries
• Premises rent
• Payments to housekeeping, security and maintenance contractors
• Catering and event service contracts
• Professional fees paid to lawyers, accountants or consultants
• Interest payments, where applicable
• Payments to resident vendors and service providers
• Payments to non-residents, which may require review under Section 195

TDS generally applies when the payment crosses the relevant statutory threshold and the recipient is covered by the section. The restaurant should maintain the payee’s PAN, address, invoice details, payment date and TDS rate.

TDS on restaurant employee salaries under Section 192

A restaurant must deduct TDS from salary under Section 192 when an employee’s estimated taxable salary for the financial year creates a tax liability.

Section 192 does not prescribe one fixed percentage for every employee. The employer calculates the employee’s estimated annual taxable income and deducts tax according to the employee’s applicable tax regime, eligible deductions and declarations.

How salary TDS works for restaurant employees

The employer should:

1. Estimate the employee’s annual salary, including taxable allowances and perquisites.
2. Obtain the employee’s chosen tax regime and relevant declarations.
3. Consider eligible deductions and exemptions under the selected regime.
4. Calculate the estimated annual tax.
5. Spread the TDS deduction over the remaining salary months.
6. Deposit the tax and report it in Form 24Q.

For FY 2025-26, employers should apply the tax rates and rebate provisions applicable to the employee’s selected regime. The tax calculation can differ significantly between the old and new tax regimes. A restaurant should not assume that every employee will have the same monthly TDS.

Example of salary TDS

Suppose a restaurant pays a head chef a fixed monthly salary of ₹90,000. The employer should calculate the chef’s estimated annual taxable salary, consider the employee’s tax regime and then deduct the required TDS from monthly salary payments. The employer should also issue Form 16 after the end of the financial year if salary TDS applies.

Part-time, temporary and full-time employees must be evaluated based on the actual employer-employee relationship. Calling a worker a “temporary staff member” does not automatically remove the salary TDS requirement if the arrangement is actually employment.

TDS on restaurant rent under Section 194-I

Restaurant owners commonly pay rent for shops, kitchens, warehouses, offices and storage premises. Section 194-I applies to rent paid to a resident when the rent exceeds the prescribed threshold.

For FY 2025-26, the commonly applicable threshold is more than ₹50,000 per month. The applicable rate is generally:

• 10% for rent of land, building or furniture
• 2% for rent of plant, machinery or equipment

The restaurant should deduct TDS at the time of credit or payment, whichever is earlier. Credit to the landlord’s account, including a suspense account, can trigger the deduction requirement.

Rent example

A restaurant pays monthly shop rent of ₹1,20,000 to a resident landlord. If Section 194-I applies, the restaurant may need to deduct ₹12,000 per month at 10%, subject to the landlord’s PAN and the applicable legal conditions.

If the landlord does not provide PAN, the restaurant may need to apply the higher rate under Section 206AA, subject to applicable exceptions. The restaurant should also check whether the landlord is an individual, Hindu Undivided Family, company or another entity because documentation and reporting details may differ.

TDS on contractor payments under Section 194C

Restaurant owners often use contractors for:

• Housekeeping
• Security services
• Pest control
• Kitchen maintenance
• Repairs and renovation
• Event catering
• Food preparation or supply services under a work contract
• Transportation and delivery arrangements

Section 194C generally applies to payments to resident contractors and sub-contractors for carrying out work.

TDS is generally required when:

• A single contract payment exceeds ₹30,000, or
• The aggregate payments during the financial year exceed ₹1,00,000

The usual rates are:

• 1% when the contractor is an individual or Hindu Undivided Family
• 2% when the contractor is another entity

The contract’s actual nature matters. A simple purchase of packaged food or ingredients is usually different from a work contract. However, a customised catering, manpower or service arrangement may require a Section 194C review.

Contractor payment example

A restaurant pays ₹75,000 to a housekeeping contractor in one invoice. If the contractor is an individual proprietor and Section 194C applies, the restaurant may deduct ₹750 at 1%. If the contractor is a company, the rate may be 2%, resulting in TDS of ₹1,500.

The restaurant should obtain the contractor’s PAN and verify whether the invoice combines goods and services. It should not automatically apply Section 194C to every supplier invoice.

Other TDS payments restaurants should review

Professional fees under Section 194J

Payments to resident professionals such as chartered accountants, lawyers, consultants, designers and certain technical service providers may attract TDS under Section 194J. The threshold and rate depend on the nature of the service and the recipient.

For example, a restaurant paying annual accounting or legal fees should examine whether Section 194J applies instead of treating the payment as a regular purchase.

Payments to non-residents under Section 195

Payments to a foreign software provider, overseas consultant or non-resident service provider may require deduction under Section 195. The rate depends on the nature of income, the Income Tax Act and any applicable tax treaty. Restaurants should obtain professional advice for cross-border payments because the compliance process differs from Form 26Q reporting.

Food delivery platforms and aggregators

A restaurant’s settlement from a food delivery platform is not automatically a TDS payment by the restaurant. The platform may have separate tax deduction or collection obligations depending on the transaction structure and applicable provisions. The restaurant should reconcile platform statements, invoices, GST records and bank settlements rather than deducting TDS from the net amount without examining the agreement.

TAN registration and TDS compliance for restaurants

A restaurant required to deduct TDS generally needs a Tax Deduction and Collection Account Number (TAN). TAN is a 10-character alphanumeric number used for depositing TDS, filing statements and issuing TDS certificates.

How to apply for TAN

A restaurant can apply for TAN using:

• Form 49B, or
• The prescribed online TAN application facility

The application is made through the official TDS and TAN services of the Income Tax Department.

After receiving TAN, the restaurant should:

1. Quote TAN in challans and TDS returns.
2. Deposit TDS through the applicable challan.
3. File quarterly TDS statements.
4. Download and correct defaults shown in the TRACES account.
5. Issue Form 16 or Form 16A to the deductees.
6. Preserve challans, invoices, payroll records and payment reconciliations.

A person should not use PAN instead of TAN where TAN is legally required.

How to file a quarterly TDS return for a restaurant owner

The quarterly return form depends on the payment type:

• Form 24Q: Salary payments
• Form 26Q: Resident non-salary payments, including applicable rent, contractor and professional payments
• Form 27Q: Certain payments to non-residents

Therefore, Form 26Q TDS filing for restaurant payments will usually cover applicable rent, contractor charges and professional fees paid to residents.

Step-by-step filing process

1. Collect deduction data
   Prepare a quarterly register showing the deductee’s name, PAN, payment amount, deduction date, TDS amount and payment date.

2. Match the books with bank payments
   Reconcile the TDS register with the general ledger, payment vouchers and bank statement.

3. Verify PAN details
   Incorrect PANs can cause defaults and prevent the deductee from receiving proper tax credit.

4. Deposit TDS
   Pay the deducted amount within the deadline using the correct challan and TAN.

5. Prepare the statement
   Use the prescribed return preparation utility or compliant TDS software.

6. Validate the file
   Run the file through the File Validation Utility, commonly called FVU.

7. Submit the return
   Submit through an authorised TIN facilitation centre or the prescribed online channel, as applicable.

8. Check processing status
   Review notices, defaults and unmatched challans through TRACES.

9. Issue certificates
   Download and issue Form 16A or Form 16 within the statutory timeline.

Form 16A issuance by restaurant owners

Form 16A is the quarterly TDS certificate issued for non-salary payments. A restaurant must issue it to eligible contractors, landlords and professionals where TDS has been deducted.

The certificate is generally downloaded from TRACES after successful processing of the TDS statement. The usual issue dates are:

• Q1: 15 September
• Q2: 15 December
• Q3: 15 March
• Q4: 15 June

The certificate should contain accurate details such as:

• Deductor’s TAN
• Deductee’s PAN
• TDS amount
• Challan details
• Payment and deduction particulars
• Assessment year

For salary payments, the employer issues Form 16 after the end of the financial year.

TDS late filing fees and interest for restaurants

Late compliance can create both financial costs and operational problems.

Interest for late deduction or payment

Under Section 201, interest is generally charged as follows:

• 1% per month or part of a month for delay in deducting TDS
• 1.5% per month or part of a month for delay in depositing TDS after deduction

The calculation treats part of a month as a full month.

Late filing fee under Section 234E

A late TDS statement can attract a fee of ₹200 per day under Section 234E. The fee cannot exceed the amount of TDS deductible or collectible for that statement.

Penalty under Section 271H

A further penalty may apply for late or incorrect filing. Depending on the circumstances, the penalty can range from ₹10,000 to ₹1,00,000. Incorrect PAN details, unmatched challans and wrong section codes can also lead to defaults.

Restaurants should correct errors promptly through a correction statement and maintain proof of payment and filing.

Practical TDS compliance checklist for FY 2025-26

Use this monthly and quarterly checklist:

• Review new employees, landlords and contractors.
• Check whether payment thresholds have been crossed.
• Obtain PAN and bank details before payment.
• Classify each expense under the correct TDS section.
• Deduct TDS at the earlier of credit or payment, where applicable.
• Deposit TDS by the due date.
• Reconcile TDS ledgers with challans.
• File Form 24Q or Form 26Q on time.
• Download Form 16A from TRACES.
• Check Form 26AS and Annual Information Statement data where relevant.
• Resolve defaults before filing the next quarter’s statement.

Summary: TDS filing by a restaurant owner for AY 2026-27

For TDS filing by a restaurant owner for AY 2026-27, the restaurant should separately evaluate salary under Section 192, rent under Section 194-I, contractor payments under Section 194C and professional fees under Section 194J. Obtain TAN, deduct and deposit TDS on time, file Form 24Q or Form 26Q for FY 2025-26, and issue Form 16A to non-salary deductees. Following the TDS filing for restaurant owners AY 2026-27 schedule will help prevent interest, late filing fees and avoidable notices.