Tax Deducted at Source (TDS)

What is TDS? – Tax Deducted at Source

TDS (Tax Deducted at Source) is income tax taken from payments like rent, commission, professional fees, salary, and interest. Instead of the recipient paying income tax later, the payer deducts it upfront. The recipient gets the net amount after TDS and adds the gross amount to their income, using the TDS as a credit against their final tax liability. This helps the government collect taxes in advance and track transactions effectively.

Example of TDS

Sun Pvt. Ltd. makes a payment for office rent of Rs 50,000 per month to the owner of the property. TDS is required to be deducted at 10%. Sun Pvt. Ltd. must deduct TDS of Rs 5,000 and pay the balance of Rs 45,000 to the property owner. The owner receives the net amount of Rs 45,000 after TDS. He will add the gross amount of Rs 50,000 to his income and can take credit for the Rs 5,000 TDS deducted by Sun Pvt. Ltd. against his final tax liability.

Due Date for Depositing the TDS to the Government?

The Tax Deducted at Source must be deposited to the government by the 7th of the next month.

For example: TDS deducted in the month of June must be paid to the government by the 7th of July. However, the TDS deducted in the month of March can be deposited till 30th April. For TDS deducted on purchase of property, the TDS payment due date is 30 days from the end of the month in which TDS is deducted.

When to file TDS returns?

Filing Tax Deducted at Source returns is mandatory for all the persons who have deducted TDS. TDS return is to be submitted quarterly and various details need to be furnished like TAN, amount of TDS deducted, type of payment, PAN of deductee, etc. Also, different forms are prescribed for filing returns depending upon the purpose of the deduction of TDS. Various types of return forms are as follows: