14 Mar 2018

TDS - Tax Deducted at Source

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CA Mukund Garodia
B.com (Hons),CA,CAIIB
CA in Job
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   •    15 Year 1 Month  experience

Tax deducted at source if a proactive step where tax is collected once income is accured or given to the recipient by the other party.The government uses TDS as a tool to collect tax to minimize tax evasion by taxing the income (partially or wholly) at the time it is generated rather than at a later date. 

TDS is not applicable to all incomes and persons for all transactions. Different rates of TDS have been prescribed by the Income Tax Act for different payments and different categories of recipients. For example, payment of redemption proceeds by a debt mutual fund to a resident individual is not subject to TDS but for a Non-resident Indian is subject to TDS. It 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 deposit the same into the government's account. 
The person who is making the payment is responsible for deducting the tax and depositing the same with government. This person is known as 'deductor'. On the other hand, the person who receives the payment after the tax deduction is called 'deductee'. Form26AS is a statement which shows the amount of tax deducted and deposited in a person's name/PAN. 

TDS is applicable on the various incomes such as salaries, interest received, commission received etc. 

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