TDS explained simpler by the top accounting firm in Bangalore

 


Introduction

TDS has a simple full form – Tax Deducted at Source. This tax was introduced in 1961 by the Income Tax Department of India to collect taxes from the very source of income generation so that there is a lower chance of tax evasion or fraud and more convenience to the taxpayers as they do not have to pay an extravagant amount at the end of the year. As per the Indian Income Tax Act of 1961, income tax has to be deducted at the source of income, dividends, and sale of assets. The employer or deductor who is making the payment is liable to deduct the tax amount (as applicable) and deposit the same amount to the government in the deductee's name during the particular financial year. In this blog, one of the top accounting firms in Bangalore will tell you what TDS is all about in the simplest way possible. Keep reading further for more knowledge on the subject. 


TDS Rates for various types of payments


Nature of Payment Made

Section

TDS Rate (%) as applicable from 1st April 2021

Salaries

192

Normal slab rate

Interest received on securities

193

10%

Interest on FD (Fixed deposit)

194A

10%

Dividends received from mutual funds and company's shares

194 and 194K

10%

Life Insurance Policies

194DA

5%

Professional Fees

194J

2% (FTS, certain royalties, call centre), 10% (others)

Rent for plant and machinery

194- I(a)

2%

Payment made while purchasing land or property

194IA

1%

Winnings from lottery or any game show

194B

30%

Insurance Commission received by an Individual

194D

5%

E-commerce organizations (w.e.f. 1.10.2020)

194-O

1%



 Impressive Benefits of TDS


Continuous Source of Income for the Government

The incorporation of the TDS system has ensured that the government's revenue pump gets continuous flows throughout the year. 


Lower risk of Tax Evasion 

The TDS is deducted by the one making the payment (deductor) so it lowers the chances of tax evasion in an effective manner. 


Convenient for the taxpayers

Now, the taxpayers do not have to arrange a lump sum amount to be paid at the end of the year. Also, the liable tax is automatically deducted by the deductor which takes a huge pressure off the taxpayer’s shoulders. 


The deducted tax is shown in Form 26AS which can be easily accessed from the Income Tax Department's website by signing into one’s account. Moreover, the deductor is liable to issue a TDS Certificate which shows the amount deducted; in case of an excess deduction, the taxpayer can file for a refund through Form 16/16A as applicable. 


Let your tax troubles be taken care by the best chartered accountants in Bangalore. 


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