TDS (Tax Deducted at Source)

TDS is a system where the tax is deducted at the source of income, typically by the payer at the time of making the payment to the payee. The person or entity making the payment (such as an employer, company, or government body) is responsible for deducting tax from the payment, and the deducted amount is paid directly to the government on behalf of the recipient. TDS is applicable to various types of income such as salary, interest, rent, commission, and professional fees.

Key Points:

• Tax is deducted by the payer before making payment to the payee.
• Common in salaries, interest, rent, professional fees, and other income types.
• The deducted amount is submitted directly to the government.
• The payee can claim TDS credit while filing their tax return, reducing their overall tax liability.
• Different tax rates apply based on the nature of the payment and the status of the recipient (e.g., individual, company, etc.).
• Timely remittance and proper documentation are crucial to avoid penalties.