What is TDS?
TDS or Tax Deducted at Source is a means of collecting income tax in India, where a certain percentage is deducted at the time of payment by the payer and deposited with the government.
It is applicable on salaries, interest, rent, commissions, professional fees, etc., as per various TDS sections defined under the Income Tax Act.
Formula Used
TDS Amount = Total Payment x TDS Rate
Net Payment = Total Payment - TDS Amount
Example
Suppose a professional receives Rs. 50,000 as fees and the applicable TDS rate is 10%:
TDS = Rs. 50,000 x 10% = Rs. 5,000
Net Payment = Rs. 50,000 - Rs. 5,000 = Rs. 45,000
Benefits
- Ensures regular flow of revenue to the government
- Prevents tax evasion
- Simplifies tax compliance for individuals
Frequently Asked Questions (FAQs)
What is TDS?
TDS is a tax deduction made at the source of income, before the payee receives the full payment.
Is TDS applicable on salary?
Yes, employers deduct TDS on salary based on the applicable tax slab of the employee.
How to check if TDS is deposited?
You can view TDS details in your Form 26AS on the Income Tax portal.