WHAT IS TDS?

 

The full form of TDS is Tax Deduced at Source. It was introduced to collect the tax at the source from which a person's income is received . The government uses TDS as a tax collection tool to minimize tax fraud by taxing individual income partially or entirely when it is created , rather at a later level.

TDS applies to different incomes , like wages , the commission received , interest received , dividends , etc. TDS does not apply to all revenues , payments and individuals. The income tax act has recommended various TDS thresholds for different payments and multiple types of recipients.

Key points

• TDS operates on the principle that any individual making a given form of payment to any individual shall deduct tax at the origin at the prescribed in the income tax act and deposits it into the government account.
• The individual must make the payment to deduct the tax and deposit the same to the government.
• The deductor is an individual or organization that is qualified to deduct the taxes before the payment has been made .
• The deductee is the individual who is responsible for paying the tax.
• From 26AS is a document showing the amount of income tax deducted and deposited in the name or PAN of an individual in a given financial year.