TDS, or tax deducted at source, is deducted at the source where an individual’s income is generated.
As per the Income Tax Act, 1961, every individual/organization is liable to pay taxes if their income is above a certain threshold.
Normally, the individual receiving income is liable to pay taxes. But TDS ensures tax deduction at the source itself. The government introduced it to reduce chances of tax evasion.
Let’s explain this concept with an example.
ABC company makes a payment of Rs 50,000 as consultation fees to Mr. X every month. The company deducts TDS of Rs 5,000 and make a net payment of Rs 45,000 to Mr. X. The deducted amount of Rs 5,000 will be directly deposited by Money9 to the credit of the government.
Since, most of us come under the purview of TDS, here’s a list of 5 things you must know about it.
A TDS certificate is issued by an employer to the employee whose income is being taxed at the source itself.
Two types of TDS certificates are issued in this regard:
TDS is charged on the income as per your chosen tax slab
However, deduction of TDS is subject to the following:
Taxpayers not complying with TDS rules shall be liable to pay penalties as per interest levied on principal taxable amount. Taxpayers must pay their taxable sum by 7th day of the month which succeeds tax filing.
A penalty of 1.5 percent will be charged for late or no payment of TDS every month till the tax is deposited.
TDS returns have to be filed on the last day of January, May, July and October of every financial year. Late or non-filling of the return invites penalty of Rs 200 per day till the return is filed.
To find whether TDS has been deducted or not, you can visit the Income Tax Department’s official website.
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