Full Form of TDS
Learn the full form of TDS and its significance in our comprehensive guide. Get clarity on tax deductions, TDS rates, consequences of non-compliances under TDS and more.
TDS Full Form
The full form of TDS is Tax Deducted at Source.
T = Tax
D = Deducted at
S = Source
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What is TDS?
TDS is a tax collection system in India where the government collects taxes from individuals and businesses at the income source.
It requires the person or entity making payment to deduct a certain percentage of the payment as tax and remit it to the government on behalf of the recipient.
TDS applies to various types of income, such as salaries, interest on bank deposits, rent, professional fees, etc.
Hindi Translation –
स्रोत पर कर कटौती (टीडीएस) भारत में एक कर संग्रह प्रणाली है जहां सरकार आय के स्रोत पर व्यक्तियों और व्यवसायों से कर एकत्र करती है।
इसमें भुगतान करने वाले व्यक्ति या इकाई को कर के रूप में भुगतान का एक निश्चित प्रतिशत (%) काटने और प्राप्तकर्ता की ओर से सरकार को भेजने की आवश्यकता होती है।
टीडीएस विभिन्न प्रकार की आय, जैसे वेतन, बैंक जमा पर ब्याज, किराया, पेशेवर शुल्क आदि पर लागू होता है।
Also Read – Professional Tax – Obligations, Exemptions, State-Wise Rates
According to Section 51, TDS provision is meant for Government and Government undertakings and other notified entities making contractual payments where the total value of such supply under a contract exceeds Rs. 2.5 Lakhs to suppliers excluding GST.
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Rates For Tax Deduction At Source
| Section | Nature of Payment | Threshold | TDS Rate |
|---|---|---|---|
| 192 | Salaries | Rs. 2,50,000 | Slab Rates |
| 192A | Premature EPF withdrawal | Rs.,50,000 | 10% |
| 193 | Interest on securities | Rs. 10,000 | 10% |
| 194 | Dividends | Rs. 5,000 | 10% |
| 194A | Interest from a banking company | Rs. 40,000 Rs. 50,000 (senior citizens) |
10% |
| 194B | Amounts won through lotteries or games | Aggregate of Rs. 10,000 | 30% |
| 194C | Payments to contractor or sub-contractor (Single Payment) | Rs. 30,000 | 1% |
| 194D | Payment of insurance commission to domestic companies | Rs. 15,000 | NA |
| 194EE | Amount payment standing to the credit under the National Savings Scheme | Rs. 2500 | 10% |
| 194F | Payment of repurchase of units by any mutual fund | No Limit | 20% |
| 194G | Commission payment on lottery ticket sales | Rs. 15,000 | 5% |
| 194H | Commission or brokerage | Rs. 15,000 | 5% |
| 194I | Rent of land, building, or furniture | Rs. 2,40,000 | 10% |
| 194K | Payment of dividends by mutual funds | Rs. 5,000 | 10% |
| 194M | Amounts paid for contract, brokerage, commission or professional fee (other than 194C, 194H, 194J) | Rs. 50,00,000 | 5% |
| 194N | Withdrawal of over a certain amount from bank and filing of ITR | Rs. 1,00,00,000 | 2% |
| 194S | Payment on transfer of Virtual Digital Assets | NA | 1% |
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Importance of TDS
TDS (Full Form – Tax Deducted at Source) is a crucial part of the income tax structure of India. It has several important roles and benefits for the government and the taxpayers, including –
- Prevents Tax Evasion: TDS is deducted at the source of income, making it more difficult for individuals or businesses to evade taxes. This ensures that the government receives its due share of income tax.
- Ease of Collection: TDS simplifies collecting tax for the government. The tax is collected upfront instead of depending on taxpayers to pay their taxes correctly and on time.
- Source of Regular Revenue: TDS generates a steady revenue stream for the government. It’s collected and deposited at regular intervals, facilitating the smooth functioning of departments.
- Reduces the Burden of Lump Sum Tax Payment: For taxpayers, TDS spreads out the payment of taxes over time. Instead of paying a large amount at once, the tax is deducted regularly. This can make it easier for people to manage their finances.
- Ensures Wider Tax Collection: TDS applies to a wide range of income, including salary, interest from bank deposits, commission income, rent, and fees for professional services. This ensures that taxes are collected from various sources, broadening the tax base.
- Documentation and Proof of Income: The TDS certificates provided by the deductor serve as proof of income and tax payment for the deductee. This can be useful when applying for loans or visas.
- Encourages Compliance: The system of TDS encourages tax compliance. Since tax is deducted at the source, taxpayers are more likely to report their income correctly.
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Consequences of Non-Compliances Under TDS
| Event | Consequences |
|---|---|
| TDS not deducted. | Section 50(1) of the TSGST/CGST Act 2017 suggests that the Interest is to be paid along with the TDS amount. Failing to pay will result in the amount recovered as per the law. Taxpayers are also liable to pay a Penalty as per Section 122(1)(v) provision. |
| TDS certificate not issued or delayed beyond the prescribed period of 5 days | As per Section 51(4) of the TSGST/CGST Act, 2017, a late fee of Rs. 100/- per day is subject to a maximum of Rs. 5000/-. |
| TDS deducted but not paid to the Government or paid later than the 10th of the next month. | As per Section 50(1) of the TSGST/CGST Act, 2017, Interest needs to be paid along with the TDS amount. Failing to pay will result in the amount recovered as per the law. |
| Late filing of TDS returns. | As per Section 47 of the TSGST/CGST Act, 2017, a Late fee of Rs. 100/day during which such failure continues, subject to a maximum amount of Rs. 5000. |
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