Tax deducted at Source (TDS)

Tax deducted at source (TDS) involves two concepts, namely deductor and deductee. A deductor is a person who is liable to pay a payment of particular nature to some other person (deductee) and deduct tax at source for depositing the same to the central government. Hence, the concept of TDS was initiated for deducting tax directly at the very source of income.

In other words Tax deducted at source is a direct tax collected from people governed by Central Board of Direct Taxes (CBDT) only when the amount to be paid exceeds the specified limit. The mode of payment may be cash, cheque or credit.

Types of TDS

The deductee receives a TDS certificate issued by the deductor and Form 26AS on the basis of which he can claim the same amount which was deducted.

Payment of TDS

It is deposited to the central government by following ways:

1) E-Payment – It is applicable for corporate assesses and others except companies coming under provisions of section 44AB of Income Tax Act, 1961.

2) Physical Method – With challan 281 in any authorized bank branch. In case of government employee, the deductor being the government can remit tax to the central government without the production of income tax challan.

Advantages of TDS to Government

  • Continuous flow of revenue for government.
  • Prevents tax evasion.
  • More tax reach as TDS is deducted at the time of payment itself further preventing commitment of fraud.

What is a TDS certificate?

The person who is deducting TDS is supposed to issue the certificate. The certificate is nothing but a form named as Form 16/16A/27D issued by the concerned authority. For a genuine TDS certificate, the PAN as well as the TAN number mentioned should be correct.


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