What is TDS?
What is TDS?
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TDS stands for Tax Deducted at Source
It is the tax deducted on certain incomes as specified under sections 192 to 194N of the Income Tax Act,1961 by the person who is responsible to pay such income.
For example, an employer is liable to deduct the TDS on the salary paid to the employee subject to the provisions of the Income Tax Act, 1961.
TDS is deducted either,
We know that Income tax liability is calculated after the income for a year is earned. In the next year, which is called the Assessment Year, income tax payable is calculated on the income earned in the Previous Year
Year 2021-2022 – This year (Previous Year) – Income is earned here.
Year 2021-2022 – Next Year (Assessment Year) – Income tax is assessed here.
But, the government collects the income tax from the income of the assessee in the Previous Year itself by the following ways:
Some of the most common sections are given below:
So, according to sections 192 to 194N, some amount of income tax is deducted from the income of the assessee in the Previous Year itself.
In the Assessment Year, the assessee also gets a tax credit for the TDS i.e. the Income Tax liability gets reduced by the amount of Tax Deducted at Source in the Previous Year.