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Tax Deducted at Source (TDS) is a procedure implemented by the Indian government to collect taxes at the source of income. A certain percentage of tax is deducted by the payer at the time of making payments to the receiver, and this amount is then remitted to the government. TDS is applicable to a wide range of income categories such as salaries, interest on fixed deposits, rent, commissions, etc. TDS helps prevent tax evasion and understanding it is crucial for both payers and receivers of income in India.
TDS has to be deducted at the rates prescribed by the tax department. The company or person that makes the payment after deducting TDS is called a deductor and the company or person receiving the payment is called the deducted.
It is the deductor’s responsibility to deduct TDS before making the payment and deposit the same with the government. TDS is deducted irrespective of the mode of payment–cash, cheque or credit–and is linked to the PAN of the deductor and deducted.
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TDS is deducted on the following types of payments:
However, individuals are not required to deduct TDS when they make rent payments or pay fees to professionals like lawyers and doctors.
TDS is one kind of advance tax. It is tax that is to be deposited with the government periodically and the onus of the doing the same on time lies with the deductor.
For the deductee, the deducted TDS can be claimed in the form of a tax refund after they file their ITR.
A deductor has to deposit the deducted TDS to the government and the details of the same have to be filed in the form of a TDS return.
A TDS return has to be filed quarterly. Different types of TDS deductions have to be filed using different TDS return forms.
Preparing TDS returns can be done easily using the ClearTDS software. Reach out to us if you need any help with your TDS returns.