What is TDS?

The Full form of TDS is Tax Deducted at Source, which is a way to collect the income tax directly from the source of income. Whenever any individual or entity makes a payment for the services or benefits to another person, like a salary, rent commission, or interest, then they have to take a small part of the payment as a tax and deposit it into the government. Then, in that condition, the payee can claim the tax deducted credit at the time of filing the ITR. 

How Does the Tax Deducted at Source TDS Work? 

Here are the following points given below on how the TDS works: 

• The person who makes the payment, called the deductor, gets the tax deduction and the collection account number from the Income Tax Department. After that, they register it on the TRACES portal online. 
• Tax was deducted by the deductor from the payment as per the prescribed rate, and the remaining net amount was paid to the person who is receiving the payments. He is also known as deductee. 
• All the tax is deposited by the deductor to the government before the due dates, and the TDS returns are filed quarterly by entering all the details of the deductee, tax deducted, and the payment. 
• For the verification of the tax deducted and deposited, the deductee can verify it by checking Form 26AS. 
• Now, the deductee can get a claim for the tax deducted when filing the ITR against their Income Tax Return. 

What are the Advantages of Tax Deducted at Source TDS? 

The advantages of TDS are: 

• It provides security that helps in the prevention of tax evasion or tax avoidance. The income tax is deducted from the income source.
• TDS allows an easy and smooth flow of revenue to the government whole year. 
• In the TDS, the tax is paid in installments, which reduces the burden on taxpayers to pay a tax at the end of the year. 
• The deductor acts as an agent of the government and has the responsibility to collect all the taxes on its behalf.