The Tax on Total Income is collected in three ways---
- Deduction of Tax at Source (TDS)
- Advance Tax ; and
- Tax on assessment through demand notice i.e. Direct Payment of Tax.
3.1. INTRODUCTION - DEDUCTION OF TAX AT SOURCE(TDS)
When a person responsible for paying any income deducts Income Tax on income at the time of payment of income, it is called ‘Deduction of Tax at source-TDS’.
TDS is a scheme of collecting tax in the year in which the income has been earned by the assessee.
-
Under the scheme , the person, who is making the payments under the specified sources, is required to deduct tax at source at the prescribed rate.
-
The person who deducts tax is known as tax deducter or a payer of income.
-
if is the duty of the tax deducter to deposit the TDS into the Govt. treasury within the specified time along with a statement, in the prescribed form.
-
if the Tax Deducter does not deduct tax at source or deducted but does not deposited with the Govt. treasury he is treated as assessee in default and is liable for payment of interest. Penalty proceedings may also be initiated.
-
The Tad Deducted at Source is regarded as the income of the assessee and it is included in his gross total income
-
The Tax deducted at source is adjusted against the final payment of tax if proof of TDS certificate is furnished along with the return of income.
-
The specified cases where tax is deducted at source are : Salaries, Interest on Securities, Interest other than interest on securities, dividends, winning from lotteries and crossword puzzles, payment to contractor, insurance commission, winning from horse races and also on other sums chargeable under the Act, which are paid to non-resident.
|
