Form 140 for July-September 2026, Due 31 October: Checks Before You File the Vendor TDS Return

The second-quarter TDS return for payments to residents is due on 31 October 2026. Most TDS demands do not come from tax that was never paid. They come from a return that does not match the challans, the PANs or the dates. This post is the check to run before you upload.

What is due and when

From 1 April 2026, TDS on contractors, professionals, rent, commission and other non-salary payments to residents is reported in Form 140 under the Income-tax Rules, 2026. It replaced Form 26Q. The quarter ending March 2026 was still filed on Form 26Q under the old Act; from April 2026 onwards, it is Form 140.

Salary TDS goes in Form 138 and payments to non-residents in Form 144. Do not mix them into Form 140.

The pre-filing checklist

1. PAN of every deductee. Validate each PAN on the TRACES PAN verification facility. A PAN that is invalid, missing or inoperative because it is not linked to Aadhaar is treated as no PAN. Section 397(2) (earlier 206AA) then requires the higher rate, generally 20% where the normal rate is lower, and the return will show a short deduction if you deducted at the normal rate.
2. Challan match. Every challan's BSR code, date of deposit, challan serial number and amount must match the return exactly. Check that the challan was paid for tax year 2026-27, not an assessment year, and under the right minor head (200 for tax deducted by you).
3. Challan balance. The total TDS mapped to a challan cannot exceed the challan amount. Overbooked challans create short payments for the last deductees mapped.
4. Payment code. The 2025 Act replaced section numbers like 194C and 194J with numeric payment codes under section 393. Code 1026 (technical fees at 2%) and code 1027 (professional fees at 10%) are a common mix-up. A wrong code produces a short deduction.
5. Date of credit or payment and date of deduction. TDS is due on the earlier of credit to the vendor's account or payment. If your books credited a bill in July but you deducted only when you paid in September, the return will show late deduction.
6. Lower or nil deduction certificates. If you deducted at a lower rate because the vendor has a certificate, quote the certificate number and the correct flag. Without it, the lower rate shows as a short deduction.
7. Totals by month. Reconcile the TDS ledger month by month with the challans and the return before you generate the file with the current utility.

Errors that turn into defaults

Interest for late deduction and late deposit now sits in section 398(3) (earlier 201(1A)).

Late filing fee and penalty

• ✓Fee, section 427 (earlier 234E): ₹200 for every day the return is late, capped at the TDS amount for the quarter. It must be paid before the return is filed.
• ✓Penalty, section 461 (earlier 271H): ₹10,000 to ₹1,00,000 for filing late or filing incorrect information.
• ✓No penalty for delay if the TDS, fee and interest are all paid and the return is filed within one month of the due date. The old one-year window is gone.

A worked example

A Rajkot engineering firm runs its checks on 18 November 2026, having missed the 31 October date.

1. PAN check. A consultant's PAN is inoperative. The firm paid him ₹60,000 in August and deducted 10%, ₹6,000. The higher rate is 20%, ₹12,000. Short deduction: ₹12,000 − ₹6,000 = ₹6,000. The firm cannot recover it after payment, so it pays it from its own funds.
2. Late deposit. ₹30,000 deducted from a contractor on 25 August was deposited on 12 October, not by 7 September. CPC-TDS counts each calendar month or part of a month: August, September and October are 3 months. Interest: ₹30,000 × 1.5% × 3 = ₹1,350.
3. Late deduction on the short amount. The ₹6,000 shortfall was deductible in August and is paid on 18 November: August to November is 4 months. Interest: ₹6,000 × 1% × 4 = ₹240. (TRACES may compute late payment interest on this amount instead; check the figure in your processed return.)
4. Late fee. The firm files on 20 November. Days late: 1 to 20 November = 20 days. Fee: 20 × ₹200 = ₹4,000.
5. Penalty. Tax, interest and fee are paid before filing, and the return goes in before 30 November, so section 461 does not apply to the delay.

Total cash out: ₹6,000 + ₹1,350 + ₹240 + ₹4,000 = ₹11,590. Filing on 31 October with the PAN fixed earlier would have cost ₹1,350.

Frequently asked questions

Sources

• ✓Section 427, Income-tax Act, 2025, Income Tax Department
• ✓Section 461, Income-tax Act, 2025, Income Tax Department
• ✓Form 140 under the Income-tax Rules, 2026: key points, TaxHeal
• ✓Section 398: consequences of TDS defaults, TDSMAN

This is a summary, not legal advice. Confirm due dates and form versions on incometax.gov.in and TRACES before you file.