✓ You may have come across the term TDS and wondered what it means. TDS, or Tax Deducted at Source, is a tax collection mechanism implemented by the Government of India to ensure timely tax collection and prevent tax evasion. With TDS in place, individuals and businesses can stay stress-free and focus on their work while staying compliant with tax laws.
✓ In this blog, we’ll break down everything you need to know about TDS—its meaning, objectives, applicable income types, deduction rates, and benefits. Understanding TDS will help you save time, money, and avoid confusion during income tax filing—whether you're a salaried individual, freelancer, or a business owner.
TDS (Tax Deducted at Source) refers to the portion of tax deducted in advance by the person making a payment (like salary, rent, commission, interest, etc.). This deducted amount is then deposited with the government on behalf of the payee. The concept ensures tax collection at the time the income is generated, not at the time of filing returns.
After filing their Income Tax Return (ITR), taxpayers can claim the deducted TDS as a refund if the total tax liability is lower than the tax already paid through TDS.
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Example 1: Mr. Anand receives ₹40,000 in advance and ₹20,000 after completing freelance work. TDS is deducted at 10%: ₹4,000 on advance and ₹2,000 on balance. Total TDS = ₹6,000.
Example 2: Mr. Anand receives ₹60,000 in full after completion. TDS = ₹6,000 deducted upfront. He receives ₹54,000.
| Scenario | TDS Requirement | Rate | Details |
|---|---|---|---|
| Individual/HUF with turnover below ₹1 Cr (Business) or ₹50 Lakh (Profession) | No | N/A | Not applicable |
| Rent above ₹50,000/month | Yes | 5% | Deduct even if audit not required |
| Salary | Yes | As per slab | Employer deducts based on income |
| Bank Interest (with PAN) | Yes | 10% | With PAN |
| Bank Interest (without PAN) | Yes | 20% | Without PAN |
| Income below taxable limit | No | N/A | Submit Form 15G/15H |
| Claiming Refund | Yes | N/A | File ITR for refund |
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Understanding TDS is essential for all taxpayers. It simplifies tax payments, prevents evasion, and supports national development. Stay updated, stay compliant, and file confidently.
Need help with TDS or ITR filing? Contact Advoxpert today for expert assistance.
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