What is TDS : Tax Deducted at Source

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  • TDS is the tax paid by individuals on certain types of incomes eg.  salary paid to employees, interest on bank deposits and bonds, winnings from lotteries and horse races, etc under Indian Income Tax Act, 1961. The deductor, or the person paying the income, deducts the tax and pays the balance to the deductee, or the one receiving the income.
  • TDS is deductible at various rates specified by the government. There may be a threshold listed for different types of incomes, and TDS may be levied only above this limit.
  • The deductor issues a TDS certificate to the deductee, giving details of the tax cut. It is treated as tax paid by the deductee on income earned, and adjusted against income tax payable for the year while filing the return.
  • The responsibility of deducting tax at source and depositing it with the government lies with the deductor. The TDS should be deposited within a week of the end of the month in which the deduction is made.
  • The returns for the TDS must be filed by all deductors every quarter on the prescribed forms. The respective due dates for filing of returns are 15 July, 15 October, 15 January and 15 May.

TDS certificate is to be issued to the deductee within specified timed under section 203 of the IT Act. The deductee should produce the details of this certificate, during the regular assessment of income tax, to adjust the amount of TDS against the Tax payable by the Deductee [assessee].

Types of TDS certificates :

  • Salaries : In case of Salaries, the certificate should be issued in FORM 16 containing the Tax computation details and the Tax deducted & Paid details. This refers to the details submitted over Form 24Q.
  • Non-salaries : In case of Non-Salaries, the certificate should be issued in FORM 16A containing the Tax deducted & Paid details. Separate certificates should be prepared for each Section [nature of payment]. This refers to the details submitted over Form 26Q and 27Q.
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