TDS stands for Tax Deducted at Source. It is a mechanism for collecting income tax in India, governed by the Income Tax Act, 1961. Under TDS, a certain percentage of tax is deducted by the payer at the time of making specified payments such as salary, commission, rent, interest, etc. The deducted amount is then deposited with the government on behalf of the payee.
TDS is required to be deducted under various circumstances including:
- Salary Payments: Employers are required to deduct TDS from salaries paid to employees based on their income tax slab rates.
- Interest Payments: Banks, financial institutions, or any person making interest payments above a certain threshold are required to deduct TDS.
- Rent Payments: Individuals or entities paying rent above a certain limit are required to deduct TDS.
- Contractor or Professional Payments: Any payment made to contractors, professionals, or freelancers above a specified limit is subject to TDS deduction.
- Commission Payments: Payments made as commission above a certain threshold are also subject to TDS deduction.
- Dividend Payments: Companies paying dividends above a certain limit are required to deduct TDS before making the payment to shareholders.
- TDS on Purchase of Property: TDS (Tax Deducted at Source) is applicable on the purchase of property. TDS is applicable when an individual purchases immovable property (other than agricultural land) from a resident seller. The buyer is responsible for deducting TDS at the time of making the payment to the seller.
The purpose of TDS is to ensure a steady collection of tax revenue for the government and to facilitate the process of tax collection by collecting it at the time of income generation itself. It helps in preventing tax evasion and ensures a steady flow of revenue to the government. You can consult ebex consulting for any help on deduction of TDS on purchase of property or filling of TDS return.
