Meaning of Tax Deducted at Source (TDS)
This post explains about Tax Deducted at Source (TDS).
Tax Deducted at Source Under IncomeTax:
Tax Deducted at Source (TDS) is a means of collecting income tax in India, under the Indian Income Tax Act of 1961. Any payment covered under these provisions shall be paid after deducting prescribed percentage. It is managed by the Central Board for Direct Taxes (CBDT) and is part of the Department of Revenue managed by Indian Revenue Service (IRS). It has a great importance while conducting tax audits.
Tax deductors are also required to file quarterly return to CBDT. Returns states the TDS deducted & paid to government during the Quarter to which it relates.
Tax Deducted at Source (TDS) is a system of collecting the tax at source itself.
Objectives of Tax Deducted at Source
- To enable the salaried people to pay the tax as they earn every month. This helps the salaried persons in paying the tax in easy instalments and avoids the burden of a lump sum payment.
- To collect the tax at the time of payment of income to various assessees such as contractors, professionals etc.
- Government requires funds throughout the year. Hence, advance tax and tax deducted at source help the government to get funds throughout the year and run the government smoothly.
Concept of TDS introduced by Income Tax Department, where person responsible for making specified payments such as salary, commission, professional fees, interest, rent, etc. to vendors is liable to deduct a certain percentage of tax before making payment in full to the receiver of the payment.
The concept of TDS is based on a simple principle i.e. tax is to be deducted at the time of payment getting due or actual payment whichever is earlier.
The due dates for the payment of the deducted TDS are on or before 7th of next month.
Deducted TDS can be adjusted against the tax payable if liability is Positive otherwise we can get the refund from the income tax department.
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