On Challan 281, code 0020 is the tick box for “Company Deductees,” and you select it whenever the payee from whom you have withheld TDS is a company. The other box, 0021, covers every non-company payee. The two are mutually exclusive, and a single challan cannot combine them, so a deductor who has withheld tax from both a company and, say, a partnership firm in the same month files two separate challans.1Protean eGov Technologies. New Simplified Challans Under On Line Tax Accounting System Frequently Asked Questions and Answers
Who Counts as a Company Deductee
Section 2(17) of the Income Tax Act, 1961 defines “company” to include any Indian company incorporated under the Companies Act, any foreign body corporate formed under the laws of a country outside India, and certain institutions or associations that the Central Board of Direct Taxes has specifically declared to be companies.2Income Tax Department. Income Tax Act Section 2 – Definitions Private limited companies, public limited companies, and foreign corporations earning income from Indian sources all fall inside 0020.
Everyone else sits outside it. Proprietorships, Hindu Undivided Families, partnership firms, LLPs, trusts, and individuals are non-company deductees regardless of turnover, so their TDS goes under code 0021. A sole proprietor billing hundreds of crores is still a non-company payee. The legal form of the recipient is what controls the code, not the size of the payment or the business.
Why the Separate Code Matters
The department keeps 0020 and 0021 apart because TDS rates under several sections depend on the payee’s legal form, and because the challan code is how the deposit is routed to the right taxpayer account. Section 194C is the clearest example: 1% when the payee is an individual or HUF, and 2% for any other payee, companies included.3Income Tax Department. TDS Rates In other sections the percentage is the same either way, but the classification still governs which code you tick and how the deduction appears in the quarterly return.
Challan 281 itself is the form for depositing TDS or TCS, meaning tax you have withheld from someone else’s income. It is not the form a company uses to pay its own advance tax or self-assessment tax; that is Challan 280. If the money you are depositing was withheld from a payment to a corporate payee, Challan 281 with code 0020 is the combination.
What to Fill In on the Challan
Before you generate the challan, have these ready:
- Your TAN, the ten-digit alphanumeric Tax Deduction and Collection Account Number assigned to every person responsible for deducting or collecting tax.4Protean eGov Technologies. TAN Services Overview – Apply and Manage TAN
- The deductee company’s PAN. This is what links the deposit to the recipient’s Form 26AS; a mismatch between PAN and name will stop the credit from flowing through.
- The assessment year, which follows the financial year of the transaction. TDS deducted during FY 2026-27 is deposited for AY 2027-28.
- Deductee status: tick 0020 for a company payee.
- Type of payment, the minor head. Code 200 is for tax the taxpayer pays on its own account (advance tax, self-assessment tax). Code 400 is for TDS or TCS deposited by a deductor. When you are depositing withheld tax, the minor head is 400.
- The breakup of basic tax, interest for any late deposit, and any penalty amount.
Verify the PAN before you submit. Mismatched identification numbers are the most common reason TDS credit fails to reach the deductee, and that failure can lead the department to treat you as an assessee in default under Section 201.5Indian Kanoon. Income Tax Act 1961 – Section 201
How to Actually Pay
Direct tax payments have moved from the older Protean OLTAS system to the e-Pay Tax facility on the Income Tax Department’s e-filing portal at incometax.gov.in.6Income Tax Department. e-Pay Tax The old Protean payment link now redirects there.7Protean eGov Technologies. e-Payment of Taxes On the portal, you generate the challan first and receive a Challan Reference Number (CRN). Payment can then go through net banking, debit card, bank counter, RTGS/NEFT, or a payment gateway that accepts credit cards and UPI. The facility works before or after login, so no e-filing account is needed just to pay.
Once the bank authorizes the payment, the system issues a Challan Identification Number (CIN) made up of the collecting bank’s BSR code, the challan tender date, and a serial number.8Protean eGov Technologies. Challan Status Inquiry Keep the CIN. You will quote it in the quarterly TDS return and in any reply to a departmental query. Status can be checked on the TIN portal using either the CIN or your TAN.
When the Deposit Is Due
TDS deducted in any month must be deposited with the government by the 7th of the following month. March is the exception: TDS deducted during March is due by April 30. Government deductors paying through treasury challans deposit on the same day as the deduction, with March deductions due by April 7.
What Goes Wrong If You Get It Wrong
Late deposit runs up interest quickly. If you failed to deduct when you should have, interest is 1% per month (or part of a month) from the date the tax was deductible until you deduct it. If you deducted but did not deposit on time, interest is 1.5% per month (or part of a month) from the date of deduction until the date of payment.9Indian Kanoon. Income Tax Act 1961 – Section 201(1A) “Part of a month” is counted as a whole month, so slipping a single day into the next calendar month effectively doubles that slice of interest.
Picking the wrong code causes a different problem. A deposit made under 0020 for a non-company payee, or under 0021 for a company payee, is unlikely to match the quarterly return, and the mismatch can stop the credit from appearing in the deductee’s Form 26AS. The deductee then cannot claim the TDS in its own return, and the department can proceed against you under Section 201 as a person deemed to be in default.5Indian Kanoon. Income Tax Act 1961 – Section 201
Matching the Code in Your Quarterly Return
The classification you tick on the challan has to match the deductee’s status when you report the deduction in the quarterly TDS return. A challan filed under 0020 with the deductee shown as non-company in the return, or the reverse, will flag during processing. Correcting the inconsistency means filing a revised return through the TRACES portal, which delays TDS credit for the recipient. Ticking the right box on Challan 281 the first time is much cheaper than fixing it afterwards.