TDS 101: What You Should Know

TDS stands for Tax Deducted at Source. It is a system introduced by the Income Tax Department of India to collect taxes directly from the income source. TDS means that tax is deducted when you earn income, such as salary, interest, or rent. Employers, banks, and companies deduct TDS and pay it to the government, ensuring a steady revenue flow and reducing tax evasion. You receive a TDS certificate, called Form 16, from your employer, detailing the income earned and TDS deducted. This helps you accurately file your income tax return.

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Key Takeaways

TDS Full Form: TDS stands for Tax Deducted at Source, a system introduced by the Income Tax Department of India

Meaning of TDS: TDS means taxes are deducted directly from your income at the source, be it salary, interest, or rent

TDS Process: Employers deduct TDS from your salary before it reaches your account, ensuring regular tax payments

Purpose of TDS: TDS helps maintain a steady revenue flow for the government and reduces tax evasion

Entities Deducting TDS: Employers, banks, and companies deduct TDS from salaries, bank interests, and rents

Bank TDS Deduction: Banks deduct TDS from interest earned on fixed deposits

TDS Certificate: Form 16 is the certificate provided by employers showing total income and TDS deducted

Using TDS Information: Use Form 16 while filing income tax returns to ensure the correct amount of tax is paid

Frequently Asked Questions
All
TDS stands for Tax Deducted at Source. It's a system introduced by the Income Tax Department of India to collect taxes directly from the income source.
TDS means that the tax is deducted right when you earn your income, whether it's from salary, interest, or rent. This ensures that you pay your taxes in small amounts throughout the year instead of a lump sum at the end.
The main reason for TDS is to ensure a steady flow of revenue to the government and to reduce tax evasion. It also makes the tax collection process more efficient.
Various entities like employers, banks, and companies deduct TDS. For example, banks can deduct TDS on interest earned from fixed deposits, and tenants can deduct TDS on rent paid to landlords.
You will receive a TDS certificate from your employer, known as Form 16. This certificate contains information about the total income earned and the TDS deducted. You can use this information while filing your income tax return to ensure you are paying the correct amount of tax.
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