Tax Deducted At Source (TDS)

 TAX DEDUCTED AT SOURCE: -  The concept of TDS was introduced in the Income Tax Act, 1961, with the objective of deducting the tax on an income, at the source of income. It is one of the indirect tax collecting methods of collecting Income Tax, which ensures regular flow of revenue to the Government. Such collection of tax has an effect at the source when income arises or accrues. The buyer (deduct or) deducts the tax from the payment made to the seller (Deductee) and remits the tax to the Income Tax Department within the stipulated time. 

Example:- Escorts Pvt ltd. is making the payment towards Rent to the owner of the building, it is required to deduct the tax on the income (i.e. before payment to the owner), at the source of income.

 TDS Process

·         A seller (Deductee) provides services to the buyer (Deductor).

·        The buyer deducts the Tax at the time of payment of advances or while accounting the Bills received.

·         The buyer deposits the deducted amount to the designated branches of the authorized bank

·         The buyer issues Form No.16A to the Deductee

·         The buyer files annual returns electronically to the Income Tax department.

·         The seller files return, along with Form 16A claiming the credit of the Tax deducted at source.

Time & Mode of TDS Payment

·         All the Tax deducted during a month is to be paid to the credit of Government on or before 7th of the next month. In case 7th of the month happens to be a Sunday or a bank holiday payment can be made on the next working day

·         TDS amount shall be paid to the government account through any designated branches of the authorized banks, along with Income Tax Challan No.281.

·         In case of collections made by or on behalf of the Government, the amount shall be credited within the time and in the manner aforesaid without the production of a challan.

The Income Tax Department has prescribed the formats for filing these returns electronically, which the buyer does in a CD/floppy.

For additional details you can visit the Income Tax Website at http://www.incometaxindia.gov.in