Tax Deducted at source is one way of collecting the taxes by the Indian
income tax department. Other ways are:
- Advance Tax
- Payment of tax under
- Tax Collection at source.
- Demand by department on
Objectives of TDS
Tax Deducted at Source was introduced in India to facilitate the
payment of tax while receiving the income and it follows the concept of
“Pay as you earn”. However, the purposes
of tax deducted at source is changing slowly. Now, the
objectives of tax deducted at source are:
Note: As per section 206AA, with effect from 1.4.2010, every person who
receives income subject to TDS under chapter XVIIB (covers all TDS
cases) shall furnish to the deductor, his PAN. If PAN is not so
furnished, the rate of TDS will be at the rates specified in the Act or
at the rates currently in force or at 20% whichever is higher.
Please note that this applies to non residents also.
- To enable the
salaried people to pay the tax as they earn every month. This helps the
salaried persons in paying the tax in easy instalments
and avoids the burden of a lump sum payment.
- To collect the tax at the time
of payment of income to various assessees
such as contractors, professionals etc.
requires funds throughout the year. Hence, advance tax and tax deducted
at source help the government to get funds throughout the year and run
the government smoothly.
- It helps to
spread the tax net wide enough to include persons who might otherwise
have evaded taxes. The minimum thresholds are raised and the rates are
reasonable and comparable with the rates prevailing in other countries.
Hence, it is very vital to make all the persons earning the taxable
income pay the tax. But, the best way to make them pay is to deduct tax
Deducted at Source now covers payments covering around 21 different
present, TDS plays a very important role in the collection of the
Indian Income Tax. This is a very easy method to collect from the
Indian Income Tax Department point of view.
person who has to deduct tax at source has to obtain Tax Deducted at
source Number (TAN) and it has to be quoted in all TDS challans, Returns and
Each unit or branch of the organisation which is liable to deduct tax
has to obtain a separate TAN.
Tax Deducted at Source has to be deposited with the Central Government
within the prescribed time limit by using the appropriate challan.
TDS has to be remitted within one week from the last day of the month
in which the deduction is made. For example, if the deduction is made
on February 12th, you have time until and
inclusive of 7th March to remit.
TDS remittance is normally made in specified branches of banks.
However, if the amount is credited or paid in the month of March, then the tax deducted
can be deposited within 30th April.
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