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What is TDS and How It is Estimated
Friday March 17, 2017 , 2 min Read
This is a user generated content for MyStory, a YourStory initiative to enable its community to contribute and have their voices heard. The views and writings here reflect that of the author and not of YourStory.
Tax at the source is collected as a way to keep the continuous revenue to be earned by the government throughout the year even if the taxes are avoided by the earning people.
Tax Deducted at Source (TDS), as the name suggests, is deducted at the time the payment of the income earned is received income includes salary, lotteries, interests from banks, payments of commissions and much more. When making payment under these segments, a percentage of the total transaction amount is withheld by the source that is making the payments. The organisation deducting the TDS is called deductors and whose payment is deducted is called deductee.
TDS is charged upon the rule that “pay as you earn”. It is deducted when the payment is made through cash, cheque and is deposited to the tax authorities who administer TDS. It helps the government in different ways like preventing tax evasion, broadens the base for tax collection and is a stable source of generation of revenue for the government whereas it is simpler for a deductee as tax automatically gets collected and deposited to the credit of the central government.
There are different types and rates applicable on different incomes and under different section different charges are charged as the part of the income. Tax deducted at source is deducted as a percentage of overall payment, and range from 1% to an extent of 30% of the payment or we say the payable amount.
Some of the major section of the income tax describing the TDS is Sections from 192 to 194L. These are some of the major section telling the TDS rate and Threshold limit
TDS on income from salaries is deducted based on an estimation made at the beginning of every financial year. A duty is cast on the employer, making him responsible for deducting taxes in monthly equated installments. TDS is collected by every individual and for that keeping an eye on every deduction which is almost impossible so for this purpose income tax authority has a certificate which is to be created as the deductor has to take when deductee pays it.
This article has been contributed by Pramod Gahlot, Content Writer, LegalRaasta- an online platform for various legal services such as TDS return filing, Income tax return filing, patent registration, GST registration etc.