What is the Full Form of TDS?

TDS is a means of collecting income tax in India, under which a certain percentage of a transaction amount is deducted by the payer and deposited with the government on behalf of the payee.

 

Objective: 

The primary objective of TDS is to collect tax from the very source of income. It ensures a steady inflow of revenue to the government and reduces the burden on taxpayers to pay lump-sum taxes at the end of the financial year.

Calculation and Applicability:

• Calculation: The TDS rate varies based on the type of income and the entity paying the income. The rates are prescribed by the Income Tax Department and are subject to change annually.

• Applicability: TDS is applicable to various types of payments such as salaries, interest on securities, dividends, rent, professional fees, and more. The threshold limits and rates differ for each category.

TDS Compliance:

• Deduction and Payment: The entity deducting TDS (deductor) is required to deposit the deducted amount to the government within a specified time frame. They must also issue a TDS certificate to the payee (deductee).

• Filing Returns: Deductors must file TDS returns periodically, detailing the amount deducted, deposited, and other relevant information. This helps in reconciling the tax credits with the deductee’s income tax return.

 

PYQs On TDS

 

Q. What is the full form of TDS?

Ans. The full form of TDS is Tax Deducted at Source.