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What is TDS
Tax Deducted at Source or TDS was introduced to collect tax from the source of income. According to the Income Tax Act, anyone making a payment is required to deduct tax if the payment is crossing certain limits. The limits or the rates are prescribed by the Income Tax department. TDS is managed by the Central Board of Direct Taxes (CBDT), which comes under the Department of Revenue.
The company or the person deducting the tax is called a deductor and the company or the person receiving the deducted payment if the deductee. The deductor is required to remit the tax into the account of the Union government and the deductee would be entitled to get credit of the amount taxed on the basis of Form 26AS.
TDS is deducted on various types of payments. It is deducted on salaries, interest payments by banks, commission payments, rent payments, consultation fees, and professional fees. TDS is not required to be paid on rent payments or on fees paid to professionals like doctors, lawyers.
TDS returns
TDS return contains the details of the deductions and has to be filed by the deductor.
TDS rates
Different TDS rates are applicable on the payments depending on the nature of the payments.
Section of the Income Tax Act makes it compulsory for every employer to deduct tax at source from the salary of employees. As per the tax laws in India, the rate of deduction depends on the income tax slab under which the employee’s salary falls.
However, TDS is applicable only when the amount crosses a certain limit which is prescribed by the Income Tax department. TDS will not be deducted if the payment amount does not cross the specified limit.