We all pay income taxes and in return, the Government provides us with basic facilities, such as water, electricity, upgradation and advancement of technology, defense forces, etc. Most of us often get confused and find it a quite hassle when it comes to knowing about taxes in a well-structured way. We all come across various terms such as Tax Deduction at Source or TDS and we often face hassle in filing for TDS, right? Well, let us help you with this. Let us understand what we mean by Tax Deduction at Source or TDS in a well-structured and conclusive way.
What is Tax Deducted at Source or TDS?
Tax Deducted at Source, or TDS is the amount of income tax reduced by the person responsible for paying our salaries, rents, educational fees, and more as per rates prescribed by the Government. Tax Deduction at Source acts as a means of stable revenue for the Government and helps manage their expenses. The TDS rates of the financial year are mentioned in the Income Tax Act, of 1961. As a result, while calculating the amount of TDS, the taxpayer should check the rates to avoid discrepancies in the future. Curious about how much you might owe in taxes this year? Our Income Tax Calculator offers a simple solution to help you project your tax liability accurately.
Let us have a better understanding of what is TDS with an example.
Example of What is Tax Deducted Source or TDS
Suppose you have a shop that you have given for rent. You charge a total of Rs. 40,000 per month as rent. The TDS amount that is deducted on rent per month is 10%. The TDS returns amount that will be deducted monthly will be Rs. 4000. The balance that is left is now Rs. 36,000, which you will be getting from the person who has taken your shop on rent after the TDS deduction. You will add Rs. 40,000 as rent received and give credit of Rs. 4,000 as a tax that will be deducted under TDS returns of the Income Tax Act. Let us look at a few benefits of Tax Deduction at Source or TDS.
Benefits of Tax Deducted at Source or TDS
Makes it hassle-free for the taxpayer
While paying taxes, we often face hassle in filing the Income Tax Returns (ITR) or checking the status of our TDS. With TDS, the taxpayer or the employee does not have to worry as they are automatically deducted. This makes it hassle-free and easy for taxpayers to file for ITR and pay his or her taxes.
Tax Deducted at Source ensures transparency
With TDS, taxpayers do not have to worry about getting cheated while paying their taxes or filing for TDS returns. Additionally, it further makes it easier for the Government to keep a check on the taxpayers and be sure of the fact that no one can evade or escape when it comes to paying taxes.
Acts as a stable income for the government
TDS paid by the taxpayers is one of the most crucial and stable incomes for the Government of India. With this revenue, the Government provides us with various facilities and basic necessities, such as electricity, water, upgradation of technology, public transport, defense and security, etc. Let us now understand the provisions on which the Tax Deducted at Source or TDS is applicable.
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Provisions on Which Tax Deducted at Source or TDS is Applicable
Tax Deduction at Source or TDS is applicable on the following transactions:
- The salary that is paid to employees
- When an immovable property other than agricultural property is transferred.
- Rent that is paid.
- Payment made to contractors and sub-contractors
- The commission that Life insurance companies pay to their agents
- Interest payment on Securities
- Dividend Income and so on.
With this, you must now know the provisions on which the Tax Deducted at Source is applicable in a well-constructed and conclusive way.
Let us now understand the main objectives of Income Tax Deduction at Source (TDS).
What are the main objectives of Tax Deduction at Source (TDS)?
How much we earn defines how much TDS will be deducted. Tax Deduction at Source has proven to be advantageous for both the taxpayers as well as the Government of India. The main objectives of Income Tax Deduction at Source (TDS) are as follows:
TDS Helps in Preventing Tax Evasion
One of the major problems faced by the Government of India is the problem of tax evasion. Tax Deduction at Source helps the government prevent tax evasion and keep a check on the taxes paid by the country's taxpayers. Additionally, it also creates transparency between the Government and the citizens of the country who are paying taxes. This transparency ensures that there is no discrepancy or evasion when it comes to tax payments.
TDS acts as a stable income for the Government of India
Tax deduction at source is one of the best and the most stable incomes for the Government of India. With this, the Government of India provides us with various basic necessities such as water supply, electricity, law and order, salaries of government employees, advancement and upgradation of science and technology, etc.
The TDS is Automatically Deducted, Making it Easier for the Taxpayers
We often face hassle while applying for TDS and paying taxes. With the help of TDS, it becomes easier and seamless for the taxpayer as the Tax Deducted at Source (TDS) is automatically deducted.
Reduces Burden on Tax Collectors
Tax Deducted at Source reduces the burden on tax collectors as it is automatically deducted. As a result, the taxpayers do not have to keep a check on the same constantly. Let us now see the due date of submitting the TDS to the government.
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Due date of submitting the TDS to the government
- The due date for submitting the TDS to the government for the first quarter is 31st July.
- The due date for submitting the TDS to the government for the second quarter is 31st October.
- The due date for submitting the TDS to the government for the third quarter is 31st January.
- The due date for submitting the TDS to the government for the fourth quarter is 31st May.
In conclusion, Tax Deduction at Source or TDS plays a vital role in the Indian taxation system, ensuring a seamless and efficient collection of income tax. We have covered the fundamental aspects of TDS, including its definition, benefits, and objectives. TDS not only simplifies the taxpaying process for individuals and businesses but also serves as a reliable source of revenue for the government.
*Tax benefits are as per the Income Tax Act, 1961, and are subject to any amendments made thereto from time to time’
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