TDS is short for tax deducted at source. Any company or person who is going to pay a salary is required to deduct an amount if the payment crosses a particular limit. TDS is deducted at rates decided by the tax department.
Normally, the person earning an income is liable to pay income tax. But the government makes sure that income tax is deducted in advance from the income obtained by you.
The company or person that makes the TDS payment is called a deductor. It is the deductor’s responsibility to deduct this amount before paying salary and submit the same to the government.
TDS can be subtracted from the following modes of payments:
- Interest payment by a bank
- Consultation fee
- Professional fee
However, individuals don’t need to deduct TDS in case of rent payments or while paying fees to professionals.
TDS is a type of advance tax. It is provided to the government periodically. As for the deductee, the TDS amount can be claimed as tax refund after filing the income tax return.
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