You might often have heard about TDS. However, have you ever tried to know more about TDS and why it is deducted from one’s salary or remuneration and how can you claim it? If not, here’s some help:
What is TDS?
TDS means Tax Deducted at Source and this denotes the tax withheld at the time of making any kind of payment. The amount of tax withheld is a certain percentage of the total payment due as specified in the IT Act for different kinds of payments made. For example, the rate of TDS applicable on payment made for professional services is generally 10%. “Even in case of salaried people the employer generally deducts TDS while making monthly salary payments. This calculation is made by considering the yearly tax liability, which in turn is based upon the tax slabs applicable to the employee, his investments, exemptions from salary income and so on,” says Chetan Chandak, Head of Tax Research, H&R Block India.
Concept of TDS
If you are a salaried employee, then as per rules, TDS is deducted from your salary each month and once you receive your Form 16, you file your taxes basis the TDS details. This system has been introduced by the Income Tax Department (ITD) which mandates people to deduct TDS when you make some specific payments such as commission, salary, rent, professional fees, etc. The concept of TDS deduction is simple and based on a principle where the person making payment is required to deduct a certain percentage as TDS.
Why is TDS deducted?
Deducting tax at source is a step by the ITD in order to avoid tax evasion. It is based on the principle ‘Pay as you earn’. The payer is required to make TDS deductions, irrespective of the mode of payment, which can be cash, cheque or credit.
via Here’s all you need to know about TDS and why it is deducted – The Financial Express
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