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What is Tax Deduction at Source (TDS)? Meaning, Definition, and various tax deduction sources

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What is TDS?

TDS is the abbreviation of Tax deduction at sources. The concept of TDS was introduced with the aim to collect the tax from the very source of the income. As per this concept, a person (payer) who make a payment any specified nature to any other person (Payee), shall deduct tax at source and remit the same into the account of the central government.


 For example, Mr. X make payment of ₹50000, to Y Ltd as a professional fee. So Mr. X will deduct TDS @10% (as per TDS Rate chart) i.e. ₹ 5000 and remit the ₹5000 into account of central government.


Deduction of Tax at Source and Advance payment (Sec. 190)

The total income of assessee which he or she earned in the previous year is taxable in relevant assessment years. For example, 

Income earned in PY 17-18 are taxable in AY 18-19, but the income tax is recovered from the assessee in Previous years itself through:-

  1. Tax deduction at source (TDS)
  2. Tax collection at source (TCS)
  3. Payments of advance tax.
Another mode of recovery of tax by an employer against assessee before making payment of salary. (According to Section 192 (1A), On the non-monetary prerequisites provided to the employee)


Payments of Self Assessment Tax. (According to Section 140A, The assessee has to pay Self Assessment Tax as per his return of income after Adjusting TDS, TCS, and Advance Tax.)

Direct Payment (Sec. 191)

According to Sec. 191, Direct payment of tax by the assessee in the following cases:


1) In case of income in respect of which provision is not made under this chapter for deducting income tax at the time of payment.

2) In any case where income tax has not been deducted in accordance with the provision of this act.

In the provision of Section 191, the procedure for recovery of tax had to be taken against assessee, whose tax is liable to be deducted but not deducted.


Explanation:- 

In order to clarify the deficulties, it hereby explained that if any including the principal officer of a company:-
  1. Who is required to deduct tax in accordance with the provision of this act.
  2. Referred to sub-section (1A) of section 192, being an employer.

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