TAX DEDUCTED AT SOURCE
○ Nature: TDS is taken from payments such as wages or interest before reaching the receiver, ensuring taxes are collected upfront. ○ Applicability: It's required for certain transactions, defined by tax laws, to curb tax evasion and secure revenue. ○ Collector: Entities making payments (employers, companies) are tasked with tax deduction, emphasizing their role in tax compliance. ○ Compliance: Deductors must submit the collected tax to the government, providing a formal acknowledgment to the person from whom it was deducted.
WHAT IS TDS?
○ TDS stands for Tax Deducted at Source. ○ It is a method to collect tax at the source of income. ○ According to Income Tax Act, 1961, the payer or deductor is obligated to deduct a ○ certain percentage of tax before making payment to the payee or deductee. ○ Then, the deducted amount is remitted to the Central Government. ○ TDS is applicable on various incomes such as salary, interest, commission, rent, professional fees, etc.
TDS ADVANTAGES
○ Ensures regular inflow of revenue to the government. ○ Prevents tax evasion as the tax is deducted at the source. ○ Reduces the burden of lump sum tax payment as the tax is deducted periodically.
Is TDS necessary only for a salaried individual?
○ No. TDS is a significant tax deduction for other people also like a businessman. ○ The tax can be adjusted towards the total tax liability finally ascertained.
Can PAN be used for payment of TDS?
○ NO. Only TAN can be utilised. ○ TAN is a separate Tax Deduction Account Number which is required for TDS.
Who will be responsible in case there is a default in tax deduction?
○ The Deductor will be liable, and interest will also be levied on the due amount as per the Income Tax Act, 1961. ○ The responsibility for a tax deduction and payment lies with the deductor only.