TDS or Tax Deducted at Source (TDS Full Form) contributes to a sizable chunk of revenue received by the Central government. It is immensely helpful in bringing down tax evasion by deducting the tax at the time of receipt of payment itself. The computation of TDS is important to understand for both the parties, i.e., the person/entity making the payment and the person/entity receiving it.
But who all are liable to collect Tax Deducted at Source on behalf of the government? And what kinds of payments/income fall under its purview? Let’s try to look at these points in this article, which can serve as a Tax Deducted at Source PDF or a repository of information that not only talks about what Tax Deducted at Source means but also covers the TDS Deduction Details.
Learn the Basics
TDS full form is Tax Deducted at Source which is a form of direct taxation as per which a person who is due to make a specific type of payment (as prescribed in the Income Tax Act) like Salary, Interest, Rent etc. should deduct a part of it while paying it to the receiver as Tax Deducted At Source, and remit the same into the account of the Central government before the due date.
So, in a nutshell, TDS meaning basically is that it is a portion of the income that is deducted as tax while receiving the payment itself, right at the source.
- TDS Full Form – Tax Deducted at Source, which essentially means a part of the income that is deducted at the time of receipt/source and remitted to the Central government by the deductor before the due date
- There are multiple streams of income or types of payments that are liable for TDS
- The rate of tax differs by the kind of payment and taxation slab of the receiver, as per the provisions of the Income Tax Act or the First Schedule of the Finance Act
- It is a type of direct taxation that significantly contributes to the Central government’s revenue and also helps in reducing tax evasion
What All Income Streams Are Liable for Tax Deductions at Source?
So, by now, you know what is TDS and what TDS Full Form in banking or in general is. But what all incomes are subject to TDS? As per the Income Tax Act, numerous streams of income are liable for deduction of tax at source. Here are some of the most prominent ones:
- Salary income
- Interest on securities
- Interest income excluding that of securities
- Interest on bank deposits & Tax Deducted at Source on fixed deposits
- Deemed dividend
- Payment of rent
- Winnings from games like lottery, fantasy games, card games, etc.
- Amount under LIC
- Professional or technical service fees, non-compete fees
- Remuneration paid to the director(s) of the company
- Payment of royalty fee
- Transfer of immovable property and compensation on acquiring immovable property
In the case of receipt of salary, there is no fixed TDS rate as to which tax should be deducted while making the payment from the employer to the employee. TDS rates on salary are the same as the tax slab rate applicable to the recipient of such salary. An employee can reduce his/her TDS deduction from the employer by submitting necessary investment proofs, which are allowed as deductions while computing the income tax liability. Failure to do so will result in a higher amount of tax being deducted from every salary payment, which can be later claimed while filing the income tax return of that assessment year.
How Is TDS Deducted and Deposited?
The TDS Full Form clearly says that a portion of income has to be deducted, but how is it done and deposited with the Central government?
While making any sort of payment liable for TDS, it is required by the Income Tax Act to deduct TDS. However, no TDS will be liable if you are an HUF (Hindu Undivided Family) member or an individual whose books do not require an audit, with the exception of making a payment of rent exceeding INR 50,000, because then TDS will be deducted even if: A. Your books are not audited; and B. You do not possess a TAN (Tax Deduction Account Number).
After deducting the tax at source, the net balance is then paid to the receiver who is liable to pay income tax against such receipt of payment. The deducted TDS has to be deposited in the bank account of the Central government by the 7th of the subsequent month. For example, if it is deducted during the month of August, then the due date will be 7th September and likewise for other months. Except for the month of March, when the due date is the end of April or the 30th of April.
However, for TDS deducted on rent and purchase of property, the due date is 30 days from the end of the month during which TDS was deducted.
What Are TDS Certificates and How Do I Verify their Authenticity?
While deducting TDS or Tax Deducted at Source (TDS Full Form) liability, a TDS certificate has to be issued by the deductor to the assessee from whose income the tax was deducted while making the payment. Following are the kinds of TDS certificates which are issued:
|Form Name||Type of Transaction|
|Form 16||Payment of Salary|
|Form 16A||Payment related to non-salary items like interest on bank deposits, etc.|
|Form 16B||Sale of property|
|Form 16C||Payment of Rent|
A taxpayer can verify the authenticity of a TDS certificate by visiting the Income Tax Department’s website and filling in the necessary particulars by referring to the TDS certificate.
How to Claim a Refund Against Tax Deductions at Source
So, now that we know what is TDS or TDS Full Form – Tax Deducted at source means, what to do in case of excess deductions? All TDS deductions are linked to our PAN numbers and that is how the government keeps a track of them. We as taxpayers can see all the details with respect to our tax deducted at source by accessing Form 26AS, which is nothing but a consolidated statement of the taxes paid by us during the year, and hence, it not only includes TDS, but also advance tax or self-assessment tax, if any is paid during the year.
So, it is very important to mention our PAN numbers accurately while we are subject to TDS to get its credit under Form 26AS. Now, if for example, our overall income tax liability comes to be less than what we have already paid to the government, then such an excess amount can be claimed while filing the income tax return, post calculation of our liability and its comparison against Form 26AS.
Did You Know?
When the concept of TDS was introduced in India, only four sources of income were covered under its purview:
2. Interest Income on Securities
3. Interest Income other than that on Securities
However, now the scope has very well expanded, and recently, during the Union Budget of 2022, Section 194S was introduced to levy a TDS or Tax Deducted at Source (TDS Full Form) of 1% at the time of payment of the transfer of virtual digital assets like cryptocurrencies.
Points to Remember
- TDS Full Form: Tax Deducted at Source
- TDS Certificates: The certificates issued against any TDS deducted which can later be verified by the taxpayer
- Form 26AS: The comprehensive form including all details with respect to TDS and advance tax paid to be used while calculating the income tax liability
So, now we know what is TDS and how it works. It is important to remember that we all can be liable for TDS as it covers a vast variety of transactions. However, it is for the benefit of the nation as it helps the government with liquidity and curbs tax evasion. As a healthy practice, we should verify our TDS certificates and go through Form 26AS thoroughly to ensure proper computation of income tax liability.
TDS Full Form is Tax Deducted at Source. TDS meaning is basically a type of direct tax, which is deducted at the time of making payments as specified in the Income Tax Act.
Yes, while receiving payments of the specified nature, TDS will be deducted, and while making payments of rent exceeding INR 50,000, an individual also needs to deduct TDS and deposit it with the government.
There is no fixed rate of TDS on salaries and it goes as per the income tax slab of the recipient in question.
While filing the income tax return of that assessment year, you can compute your income tax liability and compare it with the information contained in Form 26AS, which includes all details with respect to TDS and advance tax, if any. In case, more TDS has been paid than required then such an excess can be claimed while filing the income tax return.
TAN stands for Tax Deduction Account Number, which is mandatory to be obtained by the person deducting the TDS. However, TDS on the purchase of land and rent can be deducted even without TAN.
Also read about TCS Tax on Investment Simplified.