Tax Deducted at Source (TDS)

by Sonam Singh 03-Mar-19

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TDS (Tax Deducted at Source) is a means of collecting income tax in India, under the income tax act of 1961. The concept is to collect tax from the very source of income. The entity which deduct Tax at source, remit the same into the account of the central government. The other person whose tax got deducted at source become entitled to get credit of the amount so deducted on the basis of form 26AS or TDS certificate issued by the deducter. TDS is deducted only when the value of payment is above the specified threshold value which is defined by the income tax department.


Objective:

a) To enable the salaried people to pay the tax every month instead of paying all at once.

b) TO collect the tax at the time of payment of income to contractor, professionals etc.

c) Advance tax deduction help the government to get funds throughout the year as government requires funds throughout the year.


TDS Rates:

TDS is not applicable to all incomes and persons for all transactions. Tax deduction happen on the basis of rates specified in the relevant provisions of the act. In case of payment to non-resident person rates are specified under the double taxation avoidance agreement. TDS works on the concept that every person making specified type of payments to any person shall deduct tax at the rates prescribed in the income tax act at source and deposits the same into the government's account.

For detailed TDS rates - click here


Tax deducted/collected modes at source:

1) Electronic Mode - E payment is mandatory for all corporate assesses and to who provisions of section 44B of the Income Tax Act, 1961 are applicable. For E payment - click here.

2) Physical mode by the challan 281 in the authorized bank. You may download challan here.


TDS return services:

A deductor is required to issue a TDS certificate called Form 16 for salaried employees and Form 16A for non-salaried employees with in two months of the next financial year.

a) Form 16/16A by the deductor- download here

b) Form 16/16A verification by the tax payer - download here


How to avoid TDS

a) If a person expects that his/her total income in a financial year will be below the threshold limit, he/she can ask the deductor not to deduct TDS by submitting Form 15G/15H. 

b) Payments which are subjected to TDS, deductee is required to provide PAN details to avoid deduction at the higher rates.

For more details on TDS - click here


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