What is TDS?

TDS stands for Tax Deducted at Source. It is a system implemented by the government to collect taxes at the source of income itself. Under this system, a person or entity making certain specified payments is required to deduct a certain percentage of tax before making the payment to the recipient. The deducted tax amount is then directly deposited with the government.

TDS serves two primary purposes:

1. Revenue Collection: TDS ensures a steady flow of revenue to the government by collecting taxes in advance from the income earned by individuals or entities.

2. Compliance and Monitoring: TDS helps in monitoring and ensuring tax compliance by requiring the deductor to deduct tax at the time of making payments. It acts as a mechanism to keep track of various financial transactions and helps in preventing tax evasion.

TDS is applicable to various types of payments such as salary, interest, rent, professional fees, commission, contractual payments, dividends, etc. The rates at which TDS is deducted can vary based on the nature of the payment and the provisions of the Income Tax Act.

The deductor is responsible for deducting the TDS, issuing a TDS certificate to the deductee, and depositing the deducted tax amount to the government within the specified due dates. The deductee can then claim the TDS amount as a credit while filing their income tax return, and it is adjusted against their total tax liability.

Further, it is to be noted that TDS doesn’t exempt you from the requirement of filing of ITR. If your income exceeds the basic exemption limit, then irrespective of the fact whether TDS has been deducted or not, you have to file ITR. Let us understand it with the help of the below example, where TDS is calculated on salary income.

What is TDS return filing?

Apart from depositing the tax the deductor also has to do TDS return filing. TDS return filing is a quarterly statement that is to be given to the Income Tax department. It is necessary to submit the TDS returns on time. TDS return filing can be done completely online. Once the TDS returns are submitted the details will come up on Form 26 AS. While filing the TDS returns the various details to be mentioned are:

• PAN of the deductor and the deductee.

• Amount of tax that is paid to the government

• TDS challan information

• Others, if any.

  How to claim credit of TDS?

  It is very simple to claim the benefit of TDS while filing Income Tax Return. Simply download your Form 26AS, consider all the details which it shows and update them in your return and this will reduce your total tax liability (and it may also make you eligible for the income tax refund, if your TDS, advance tax etc exceeds total tax liability).

TDS Return