Overview of TDS
TDS is one of the modes of collection of taxes,
by which a certain percentage of amounts are deducted by a person at the
time of making/crediting certain specific nature of payment to the
other person and deducted amount is remitted to the Government account.
It is similar to "pay as you earn" scheme also known as Withholding Tax
in many other countries, one of the countries is USA. The concept of TDS
envisages the principle of "pay as you earn". It facilitates sharing of
responsibility of tax collection between the deductor and the tax
administration. It ensures regular inflow of cash resources to the
Government. It acts as a powerful instrument to prevent tax evasion as
well as expands the tax net.
Who shall deduct tax at source?
Every person responsible for making payment of
nature covered by TDS provisions of Income Tax Act shall be responsible
to deduct tax.
However in case of payments made under sec.
194A, 194C, 194H, 194I and 194J in respect of individual and HUF, only
if the turnover or professional receipt exceeds sum of Rs. 40 lakh or
Rs. 10 lakh respectively (the limits will be Rs.60 Lakh or Rs. 15 Lakh
respectively w.e.f. 01.07.2010) in previous year, he is required to
deduct tax at source.
These persons are mainly:
- Principal Officer
of a company for TDS purpose including the employer in case of private
employment or an employee making payment on behalf of the employer.
- DDO (Drawing & Disbursing Officer), In case of Govt. Office any officer designated as such.
- In the case of
"interest on securities" other than payments made by or on behalf of the
Central govt. or the State Government, it is the local authority,
corporation or company, including the Principal Officer thereof.
Such person is called Deductor while the person from whom the tax is deducted is called Deductee.
Tax must be deducted at the time of payment in
cash or cheque or credit to the payee's account whichever is earlier.
Credit to payable account or suspense account is also considered to be
credit to payee's account and TDS must be made at the time of such
credit.
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