What is the full form of TDS?
The full form of TDS is Tax Deducted at Source. It was introduced to collect the tax at the source from which a person’s income is received. The government uses TDS as a tax collection tool to minimize tax fraud by taxing individual income partially or entirely when it is created, rather than at a later level.
TDS applies to different incomes, like wages, the commission received, interest received, dividends, etc. TDS does not apply to all revenues, payments and individuals. The Income Tax Act has recommended various TDS thresholds for different payments and multiple types of recipients.
Necessary points to remember in TDS
- TDS operates on the principle that any individual making a given form of payment to any individual shall deduct tax at the origin at the rates prescribed in the Income Tax Act and deposits it into the government account.
- The individual must make the payment to deduct the tax and deposit the same to the government.
- The deductor is an individual or organization that is qualified to deduct the taxes before the payment has been made.
- The deductee is the individual who is responsible for paying the tax.
- Form26AS is a document showing the amount of income tax deducted & deposited in the name or PAN of an individual in a given financial year.