Tax Deducted at Source (TDS)
Tax Deducted at Source (TDS) is a system where tax is deducted at the time of making certain payments such as salary, interest, commission, rent, or professional fees. The deducted amount is then deposited with the government on behalf of the recipient.
It ensures tax is collected at the source of income.
1. How TDS Works
- Payer (deductor) deducts tax before making payment
- Deducted amount is deposited with the government
- Recipient (deductee) gets credit for the tax deducted
2. Common Payments Covered Under TDS
TDS applies to various types of payments, including:
- Salary
- Interest (bank deposits, loans)
- Rent
- Professional or consultancy fees
- Commission and brokerage
- Contract payments
Each category has specific rates and thresholds.
3. TDS Certificates
- Form 16: Issued for salary income
- Form 16A: Issued for other payments
These certificates show the tax deducted and are used while filing ITR.
4. Reflection in Tax Records
- TDS details are reflected in Form 26AS and AIS
- Must be matched with ITR to claim credit
5. Importance of TDS
- Ensures regular flow of tax to government
- Reduces chances of tax evasion
- Helps taxpayers avoid large year-end tax payments
6. TDS vs Final Tax
- TDS is not the final tax
- It is an advance collection of tax
- Final liability is determined at the time of filing ITR
7. Common Mistakes
- Not checking Form 26AS for TDS credit
- Assuming TDS deducted = no further tax payable
- Not including income even if TDS is deducted
- Mismatch between TDS and reported income
Practical Insight
Most people think:
“TDS is deducted, so I’m done.”
That’s incomplete.
Because:
- TDS is based on estimates
- actual tax depends on total income
Which means:
👉 you may still have to pay extra or claim refund
How N D Savla & Associates Can Help
At N D Savla & Associates, we help you:
- Verify TDS credits and reconcile with Form 26AS
- Ensure correct reporting in ITR
- Identify shortfall or refund situations
- Avoid mismatches and notices
