The basic aim to introduced TDS is to collect the tax from every source of income. TDS stands for "Tax deducted at source"

Under this concept a person (deductor) who is liable to make a payment of any specified nature to any person (deductee) shall deduct a tax source and deposit the amount with central government. The deductee from where income tax has been deducted at source will be entitled to get credit of the amount deducted with the help of Form 26 AS or TDS certificate issued by the deductor.

TDS is applicable on various income(s) such as salaries, interest received, rent, commission, professional fee etc.

How TDS Works: Any person who is making a specified payment mention under income tax act 1961 is required to deduct TDS at the time of making a payment. It is the duty of the deductor to deposit the TDS amount with government. Once TDS is deposited it reflects on deductee 26 AS. Deductee can view 26AS on traces website. No TDS is deducted on individual or HUFs where books of accounts are not required to audit subject to some exemption which are explained below.

• (a) Payment of rent exceeding Rs.50000.00 per month: If rent payment made by individual or HUFs is exceeding Rs.50000.00 per month the tenant is required to deduct TDS @5% even if the landlord (individual or HUF) is not liable to tax audit. Such tenant(individual or HUFs) who is liable to deduct TDS@5% need not to apply for TAN.
• (b) Interest on bank deposit U/S 194A: Deductor shall deduct TDS if the amount of interest paid or credited in the financial year exceeds Rs.40000.00 during the financial year where the deductor is
  Bank or banking company
  Post office
  Any co-operative society engaged in the banking business
  Rs. 5000.00 in any other case
  Rate of TDS U/S 194A: Following is the applicable tax rates under section 194A
  - 10% When PAN card is provided
  - 20% When PAN card is not provided
  
• (c) TDS deducted under section 192 (Income from Salary): Employer can deduct a TDS if your income is above the basic exemption limit. TDS is deducted as per the income tax slab rate which is applicable on an individual.
  If the employee has submitted investment proof for claiming the dedication to his employer and after claiming the dedication, net income is below the basic exemption limit, then no TDS is deducted on the income.
  Due date for depositing the TDS to the government: The tax deducted at source must be deposited to the government by the 7th of the subsequent month.
  But TDS deducted in the month of March can be deposited till 30th April.
• TDS deducted on rent or purchase of property: In case of TDS deducted on rent or purchase of property, the due date is 30 days from the end of the month in which TDS was deducted.
• How to deposit TDS:TDS is deposited using Challan No. ITNS-281 on the government portal.
• When to file TDS Return:Filing of TDS return is mandatory for those persons who are deducting TDS. TDS return is to be submitted quarterly. There are different types of TDS returnsdepending on the purpose of deduction. Different type of return form are as under

TDS Certificate:Every deductor is responsible to issue TDS certificate to deductee. There are different type of TDS certificate which are categorises are as under.

Working Notes:

Note (1) Payment of salary: Income tax slab are as under.

Note(2) Interest on Securities:

• (a) Any debenture or securities for money issued by or on behalf of any local authority or a corporation established by a central, state or provincial act.
• (b) Any debenture issued by a company when such debenture are listed on a recognised stock exchange in accordance with securities contract (Regulation) act 1956 and any rules made these under.
• (c) Any securities of the central or state government [i.e. 8% saving (taxable) bonds 2003 and 7.75% saving (taxable) bonds 2018]
• (d) Interest on any other securities.
• Note 3 Section 115-o of the income tax act:Dividend distribution tax is the tax which is required to be paid @15% by the company who is declaring or paid any amount of dividend. The provision of dividend distribucation tax are governed by section 115-o under chapter XII-D and were introduced by finance act 1997.
• Note 4 Interest other than interest on securities include:The deductor shall deduct TDS if the amount of such interest paid or credited or likely to be paid or credited in the financial yearis Rs 40000 where the deductor is
• (a) Bank or Banking company.
• (b) Co-operative society engaged in the business of banking.
• (c) Post office.
• (d) Rs 5000.00 in any other case.
• Note (5)Payment in respect of life insurance policy:With effect from 01/09/2019 tax shall be deducted on the amount of income comprised in insurance payout.
• Note (6) Provision of 194IA:applies to a resident transferee who is indebted to make payment to a resident transfer for the transfer of any immovable property, barring agricultural land. These taxpayers are obligated to deduct a percentage of such transaction before making the payment
• Exemption: This provision is not applicable for transfer of agricultural land and other transaction the value of which is less than 50.00 lakhs. It may be noted that the provision of section 203Adon't apply to the tax payers who is required to deduct tax under this section.
• Note (7):This provision is applicable from 1stjune 2017 minimum rent.
  Section 194IB is applicable if rent paid to individual/ HUFs exceeds Rs 50000.00 per month.
• Note (8):Meaning of joint development agreement is an agreement of the owner of asset to allow a person to build a real estate project on that asset. In consideration owner received share and/ or cash payment.
• Note (9):with effect from 1stjune 2017 the rate of TDS would be 2% in case of payee engaged in business of operation of call centre.
• Note (10):With effect from 1st April 2017 no deductionof tax shall be made on any payment which is exempt from levy of income tax under right to fair compensation act 2013
• Note (11) Exemption U/S 10 (23FBB):Any income referred to in section 115UB accruing or arising to as received by unit holder of an investment fund being that proportion of income which is of the same nature of income chargeable under head "profit & gains of business profession".
• Note (12):With effect from 1st April 2018 benefits of such concessional TDS rate has been further extended by three years. Now TDS at concessional rate of 5% will be applicable for borrowing made before 1st July 2020.
• Note (13):With effect from 1st April 2018 benefits of such concessional TDS rate has been further extended by three years. Now TDS at concessional rate of 5% will be applicable for borrowing made before 1st July 2020.
• Note (14):The tax shall be deducted under section 194M with effect from 1st September 2019 when aggregate of sum credited or paid during the financial year exceeds Rs 50.00 lakhs.