Income Tax - Explainer on Tax Deducted at Source (TDS)

TDS - Everything You Need to Know About Tax Deducted at Source - TDS Definition, Filing, Return, and Due Dates

Income Tax - Explainer on Tax Deducted at Source (TDS)

Basics of Tax Deduction at Source (TDS)

If you are salaried, you may have some knowledge of TDS.

However, you can learn everything there is to know about TDS by reading this blog.

TDS stands for Tax Deduction at Source

One method of collecting taxes by the government is through TDS. When paying or crediting a specific type of payment to another person, a certain amount is withheld by a person at predetermined rates, and the withheld money is transferred by the deductor to the government's account.

It is comparable to the idea of a "pay as you earn" plan. TDS is nothing more than an early tax collection.

Example of TDS

Suppose Jorden Ltd makes a payment of Rs. 50,000/- towards professional fees to Mr. Sky, then Jorden Ltd shall deduct a tax of Rs.5,000/- i.e. 10% of Rs.50,000/- and make a net payment of Rs.45,000/- (50,000/- deducted by Rs.5,000/-) to Mr. Sky.

The amount of 5,000/-deducted by Jorden Ltd will be directly deposited to the government and it will issue a certificate to Mr. Sky stating the same.

Objectives of TDS

  • The TDS system allows salaried persons to pay their taxes conveniently in instalments rather than having to make one large payment.
  • TDS and advance taxes facilitate the government's year-round access to funding.
  • It makes sure that the tax net is sufficiently wide and discourages tax evasion.

TDS Certificate

The deductor issues TDS certificates, which the deductee receives in order to claim TDS while filing their income tax. The deductor typically issues one of two different types of TDS certificates.

Form 16

Form 16 is a document or certificate issued by their respective employers to salaried professionals in India in accordance with Section 203 of the Income-Tax Act 1961. Also known as a "salary certificate," it contains all of the information about the salary paid by the organisation or employer to the employee in a given fiscal year, as well as the income tax deducted by the payer from the individual's salary.

Form 16A

Form 16A is essentially a certificate that every employer and organisation is required to maintain for their employees. It is a Tax Deducted at Source (TDS) certificate that lists all of the taxpayer's or individual's sources of income.

Form 16A is a Tax Deducted at Source (TDS) certificate that is included with Form 16. The Form 16 is only for salary income; the Form 16A is for TDS on income other than salary. Form 16A will be issued when TDS is deducted from fixed deposits, insurance commissions, rent receipts, or any other income on which TDS is deducted.

Due Date for Depositing TDS

  • By the 7th of the next month, the TDS must be paid to the government.
  • For instance, TDS collected in June must be remitted to the government by July 7th. The TDS deducted in March, however, may be deposited up to April 30.

Filing of TDS Returns

Filing TDS returns is mandatory for all the persons who have deducted TDS.

TDS Due Date as per Income Tax Act
TDS Due Date as per Income Tax Act, 1961

FAQ’s

1) What to do if the TDS credit is not reflected in Form 26AS?

Non-reflection of TDS credit in Form 26AS may be caused by a number of factors, including the payer's failure to file a TDS statement and the payer's citation of the deductee's inaccurate PAN. Therefore, in the event that the TDS credit is not reflected in Form 26AS, the payee must get in touch with the payer to find out the proper causes.

2) What is the difference between PAN and TAN?

P​AN stands for Permanent Account Number and TAN stands for Tax Deduction Account Number. TAN is to be obtained by the person responsible to deduct tax

3) How can I know the quantum of tax deducted from my income by the payer?

You can ask for TDS certificate in respect of tax deducted. You can also check Form 26AS​ from your e-filing account at https://incometaxindiaefiling.gov.in

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