TDS Full Form is Tax Deduction at Source. As per the Indian Income Tax Act 1961, an amount of tax must be deducted when a company or a person makes a payment exceeding the threshold limit. It is a kind of advance spot tax deducted from the actual source of income. The Central Board for Direct Taxes (CBDT), a department of the Government of India, regulates the rates and collection of TDS.
What is TDS?
Tax Deduction at the Source (Full Form of TDS) rate ranges from 1% to 30% or more, depending on the entity on which it is applicable. TDS is charged when payments are made in incentives, commissions, interests on deposits, dividends, services, rent or purchase of a property, etc. This tax must be deposited in the treasury of the Indian government within a specified time.
For example- a TDS of 2% is charged on the rental amount of plant & machinery (threshold limit being Rs 180000). A total of 30% is deducted from the prize money from lottery, horse racing, or other games (threshold limit is Rs10000).
The Rationale for TDS Deduction
- The source or person who deducts TDS is referred to as “Deductor.” The person to whom the payment is being made is termed “Deductee.”. For example, a deductor is an employer/organization paying a salary or incentive to their employee who would be a deductee.
- If one has deducted more than the required tax amount, they will be eligible for a TDS Refund if you file your TDS Return.
- The accountability to provide Form 16 /16A (TDS certificate) to the employee with the computation of the tax deducted amount lies with the employer/deductor.
- Tax Deduction at Source, TDS can be filed online through a hassle-free income tax department window.
- TAN-Tax Deduction and Collection Account Number must be obtained by all persons responsible for deducting or collecting tax.
- TDS is not levied on payments in favor of RBI or the central government. Apart from this, TDS is exempted from the amount of interest for many other financial products. There are a few cases when the TDS is exempted.
TDS Return
Apart from tax payment, the deductor should file a TDS return. It is a quarterly statement to be produced by the income tax department. Following are the details to file TDS returns –
- TDS challan information,
- Amount of tax paid to the government.
- PAN of the deductor and the deductee.
Some changes in the threshold limit in the payment of TDS have been reflected in the budget 2019-
- TDS limit increased from Rs 10000 to Rs40000 on the Post Office Savings and Bank Deposits
- TDS threshold for a tax deduction on rent is hiked from Rs 180000 to Rs 240000.
Conclusion
TDS Full Form is Tax Deduction at Source. It refers to the tax deducted when a company or a person makes a payment exceeding the threshold limit. The Central Board for Direct Taxes regulates the rates and collection of TDS.
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