What is the full form of TDS?
TDS full form is Tax detected at the source. It is controlled by the Central Board of Direct Taxes (CBDT) which is managed and governed under the Indian Income Tax Act 1961.
Indian revenue service IRS this TDS as a revenue department management. Any person who works in a way that he makes money from salary or through other ways he will be applicable for tax.
TDS is applicable for those types of payments that take effects on money circulation in India. These types of payments are:
- Rent payment
- Professional fees
- Commission payment
- Consultation fees
- Interest payment by bank
It is a type of tax which is collected not form all the individual such as doctors and lawyers but they are deposit into government treasury.
What is TDS and how it is collected?
Every company or government agencies deposit at some range of TDS as an advance tax. The detection rate of TDS is not uniform but it changes from 1% to 30% depending on the individual who is the applicable person.
There are two types of entities involved in TDS. These entities are
Deductor can be any person or any company that is responsible for taking Tax before the payment is made. While
Deductee is a person who gives TDS as the specific amount of time and range.
What is the TDS Certificate?
TDS Certificate is given to that person which is working under the professional fees from an organization. TDS Certificate always issued by the deductor to the deductee. Two different types of TDS certificates can be given to any deductee.
Form 16 is a certificate issued to the deductee for the whole year and Form 16A certificate for or other than salary.
Mr. Gupta is working in an industry e and the company charged 15% of tax deduction from his salary then he will receive Form 16 TDS certificate. However, Mr. Gupta is working as a professional employee, and also receiving professional fees from the organization will also give tax other than salary e under the case of Form 16A.
When TDS should be detected?
TDS should be deducted at the time of payment and also can be detected through different scenarios such as:
After the payment was paid in advance
After the employee raised an invoice and he was paid
The employee received the amount in advance before the completion of the assignment
Why TDS deduction
The TDS works on ‘pay as and when you earn’ principle and therefore it has benefits for all taxpayers and the increase in current assets.
Here are some benefits of TDS:
- Delegation of tax collection
One of the major advantages of TDS is that it makes the government responsible for tax collection in an easy way. Tax collection is one of the hardest processes in any government so that’s why Indian comment transfer mystics collection responsibility to the TDS department.
The TDS department detects all the Tax persons before they get paid by the employer. For example, an employer will detect all the tax before going to pay the employee a monthly or yearly salary. Tracking and collecting all the Tax from employees could be difficult once salary payout to employees at the end of the month.
- Prevention in Tax aviation
Tax evasion or bypassing by different departments make any government week. For this reason, TDS is one of the best processes to collect Taxes from different departments without any problem.
TDS process collects all the Tax from the person who did not already pay. In this way, all the tax thieves can be caught why TDS department.
- Biggest Tax collection efforts
TDS is one of the great plans by the government of India to collect Tax in the biggest process. In this process, all the necessary taxpayer departments and the people included every year.
- The steady Tax Collection
TDS is it possible to carry on tax collection every month with fixed patterns and processes. It gradually increased the government tax collection and also a source of income for the development of the country.
This scenario also works in the same bad and good economic conditions because it includes all the advance and self-assessment tax.
- Easier tax payment
TDS makes the Tax detection process easier for deductees. Attacks process consists of 12 different small parts that have to be paid by the taxpayer throughout the year or at the end of the year.
Once a person submits the advance tax then he had not required to remember the tax payment. He can easily pay out advance tax after 3 months.
What is the difference between TDS and advance tax?
Both TDS and advance tax have lots of difference because they work into a different schema. Deposit of Tax from both scenarios is different because when it is collected every month while others are collected for a year or after 3 months.
Here are some of the major difference between TDS and advance tax:
- In advance tax, a person is responsible to pay tax on its own. While in TDS the employer of the company who is eligible for TDS is responsible for collecting tax from each employee before payout. In this way, the taxpayer is you can say as an employee does not carry about the tax collection.
- Another major difference between TDS and advance tax is the scenario of deposit. TDS works every month while advance tax is deposit every 3 months. Sometimes in different cases, TDS is also collected quarterly or annually.
- TDS deductor files return quarterly but in advance tax, it is returned in a year.
When is TDS applicable?
TDS is applicable in these different scenarios:
Salary: An organization can detect employees’ salaries with a tax rate of 8.5 once he receives the net salary income. In the biggest (5% of 2.5 lakhs) + (20% of 3.5 lakhs).
All banking process automatically detect some amount of tax once you earn interest more than Rs 40,000.
TDS is also applicable once you apply for Commission payments from any organization or film.
TDS applies to all the rent payments more than 50,000/month.
All the lawyers, financial planners, architects, and other professional people are applicable for Consultation fees which are included in TDS.
A professional fee is also detected once a firm hired a person from Professional services or Other industries. A professional fee is detected before the payment made.