How TDS (Tax Deduction at Source) Deduction Plays its Role in Compliance

(TDS) Tax Deduction at Source

The payslip of every salaried individual contains a section called TDS. The TDS is referred to Tax Deducted at Source. In India, the policies and regulations associated with tax deduction are handled by the Central Board of Direct Taxes (CBDT). The Income Tax Act describes TDS as the deduction of tax at the point of source of income.

The employer/deductor deduct tax on behalf of the deductee/taxpayer and pass it on to the Government. The TDS collection supports the government in maintaining a stable revenue inflow throughout the assessment year. Also, it restrains people from avoiding payment of taxes.

Here is the list of some expenses and sources of income which are considered to deduct tax at source.

  • Salary
  • Interest from bank
  • Rent payment
  • Payments on commission
  • Payments to freelancers and lawyers
  • Lottery etc

Besides this, the list of expenses and income under TDS contains several other expenses and income sources as well which you can get from the Income Tax Act, Sections 192 to 194L.  An individual who falls in Income Tax slab remains responsible for deduction of TDS.

How TDS (Tax Deduction At Source) Works?

The entity which is subjected to payment of TDS deducts a certain percentage of amount from earning of the deductee. For which, the deductee receives a certificate from the deductor of the amount paid as the TDS. Also, the deductee can use this certificate at the time of assessment for the adjustment of TDS paid amount against the tax payable. There are different types of TDS certificates available which are as follows:

  1. Form 16: This document is provided to the salaried individual which contains details such as tax computation, deduction, and payment.
  2. Form 16A: The individual which are non-salaried are provided with this Form 16A certificate for TDS deduction. It contains details of deducted tax amount and its payment to the government. This is further categorized based on different sections.

It is the responsibility of the deductor to deposit the deducted amount as TDS to the government. Once deposited the amount automatically reflects in the Form 26AS of taxpayers available on the TRACES website linked to the income tax department’s e-filing website. 

How to Avoid TDS?

However, there is a provision for non-deduction of source tax which can only be utilized when deductee approaches deductor for doing so and produces his advance income tax declaration using Form No. 15G/15H. Form 15G meant for individuals while senior citizens have to furnish Form 15H. 

According to the Income Tax Act, if an individual wants to claim for non-deduction at sources, he/she has to fulfill the criteria given below.

The earning of the Individual as per section 192A, 194 or 194EE should not exceed the maximum chargeable limit to income-tax.

A resident (other than a company or a firm) earns below the maximum chargeable amount to income-tax under section 193, 194A, 194DA or 194-I, is liable for approaching deductor for non-deduction of tax at source.

If an Indian resident senior citizen earns following the section 192A, 193, 194, 194A, 194EE, or 194-I or 194DA, can apply for non-deduction at the source.

As per section 203, Deductor is liable to issue a certificate to the deductee for deduction of tax. This certificate holds the complete information of all the deductions of the individual throughout the assessment year. Similarly, banks also issue a certificate while making payment of pensions, etc. The salaried employees recognized this certificate as Form No. 16 (including pension).

Like we file for Income Tax return, refund claim of excess deductions at source is also applicable. Tax deducted in excess is calculated by finding out the difference between the tax deducted and the actual payments made to the deductor. In such case, the Direct Tax Acts allows tax adjustments in any tax liabilities first and then headed towards issuance of a TDS Refund.  

With TDS, both the Deductor and deductee gets benefited with several advantages which are as follows:

Benefits to TDS  Deductee:

  • TDS is collected on a monthly basis as small installments which ends up the hassle of paying a large amount for the assessment year.
  • The tax rebate for assessment year can be calculated easily.
  • It facilitates with better budget management
  • No need to stand in queues for the payment of tax as deductor himself handles the responsibility of tax collection.

Benefits to TDS Deductor:

  • TDS maintains a steady flow of money to the government.
  • Tax payment at the right time.
  • It is easy to use and cost-effective.
  • Online filing of tax collection avails deductor with maintained accuracy.
  • In the case of TDS failure, the payee will have to release his tax liability.

To know the complete payable amount, you can go through Form 26AS available in your e-filing account. Thus, it is the best possible way of tax collection from the Government of India. Gen TDS Software from SAGInfotech is one of the best software available in the tax industry.

With this, an organisation or business can easily perform the task of TDS deduction from the earnings of working employees without any hassle. Also, the e-filing of TDS via Gen TDS Software follows a few clicks for TDS deposition to the government. So, opt for Gen TDS Software and run your business seamlessly.


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