Whenever we listen about the term TDS the first thing that comes to our mind is, what is the meaning of TDS? So, basically, TDS stands for Tax Deducted at Source. Generally, the meaning of TDS is to collect income tax in India, under the Indian Income Tax Act of 1961. Firstly, the notion of TDS was introduced with an ambition to collect tax from every source of income. As per some rules of income tax, you should claim credit for TDS on income that is paid or accrues to you in the same financial year as the TDS is deducted.
Most commonly, the person who is making the payment is responsible for deducting the tax and depositing the same with the government. Any of the payments covered under the TDS provision shall be paid after deducting a prescribed percentage. TSDS is generally managed by the Central Board for Direct Taxes (CBDT) and it is a part of the Department of Revenue managed by the Indian Revenue Service. Also, TDS has great importance while conducting tax audits. Also, the assessee is required to file a quarterly return to CBDT. Returns state the TDS deducted and paid to government during the Quarter to which it relates.
A deductor is usually needed to issue a TDS certificate known form 16 for salaried employees and Form 16A for the non-salaried employees within a specific time. Deductor even has to issue TDS certificates within two months of the next financial year. Some objectives of TDS can also be stated as :
- To warrant the salaried people to pay the tax as they earn every month. So, this can help the salaried persons in paying the tax in easy installments and avoids the burden of a lump sum payment.
- Even the government requires funds throughout the year. So, advance tax and tax deducted at source help the government to get funds throughout the year and run the government smoothly.
- To collect the tax at the time of payment of income to different kinds of assesses such as contractors, professionals, etc.
According to the law, TDS is Section 302 of the Income Tax Act and also notes that the rate of deduction of tax in respect of such dividend is 10%. TDS also seeks deduction of tax at source on the transfer of certain immovable property other than agricultural land to a resident transferor. Generally, the TDS on the property is needed to be deposited in 30 days from the end of the month in which deduction is made for all payments to be made on or after 01st June 2016. Also according to Section 194C of Income Tax Act, 1961 TDS is to be made at the time of credit to the account of contractor or at the time of payment in cash or by cheque or draft or even by any other mode whichever is earlier.
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