What is the Full Form of TDS?
The full form of TDS is Tax Deducted at Source.
What is TDS?
It is a standardised system used by tax authorities to collect taxes at the source of income. The TDS rates will be set by the government, and they must be deducted accordingly. The individual or company making the payments after deducting TDS is known as the deductor, and the one who received it is called a deductee.
Why is TDS important?
- Ensures timely government revenue via regular tax collection.
- Promotes tax compliance & minimizes tax evasion risks.
- Simplifies the taxpayer’s annual tax payment & filing process.
- Provides steady cash flow for national economic stability.
- Encourages financial transparency & accountability among taxpayers.
What are the Different Types of TDS?
| Type of TDS | Description |
| TDS on Salary | Deducted by employers based on the employee’s total annual income. |
| TDS on Rent | Applied to rental payments exceeding the prescribed monthly limits. |
| TDS on Professional Fees | Charged on payments made to consultants, freelancers, or professionals. |
| TDS on Interest | Deducted from interest earned on deposits, loans, or securities. |
| TDS on Commission | Applicable to the commission or brokerage received by agents. |
| TDS on Contractor Payments | Applied to payments made for any contractual or subcontract work. |
| TDS on Property Purchase | Deducted by the buyer during immovable property purchase transactions. |
| TDS on Dividends | Levied on dividend income distributed by Indian companies. |
How do Organizations Deploy TDS?
1. Obtain TAN
Register and obtain a Tax Deduction Account Number from the tax authorities.
2. Calculate TDS
Determine the applicable TDS rate based on payment type.
3. Deduct TDS
Deduct the required tax amount while making payments to recipients.
4. Deposit TDS
Submit quarterly TDS returns with accurate challan and deduction details.
5. Issue TDS Certificates
Provide Form 16 or 16A to recipients as proof of deduction.
How is TDS Calculated?
1. Identify the Payment Type
Determine if the transaction attracts TDS (salary, rent, interest, etc.).
2. Check Applicable Rate
Refer to the Income Tax Act for relevant TDS rates.
3. Calculate Deductible Amount
Apply the rate on the total payment.
4. Deduct & Deposit
Deduct tax before payment & deposit it with the government.
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