Understanding TDS: Tax Deducted at Source in Income Tax Explained
Learn about TDS in income tax, its implications, and how it ensures timely tax collection.
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TDS (Tax Deducted at Source) chapter in income tax refers to the mechanism wherein tax is deducted at the point of income generation. It includes provisions detailing the responsibilities of the deductor, rates, and thresholds for various incomes like salary, interest, and more. This helps in preventing tax evasion by ensuring timely collection of tax directly from the source of income.
FAQs & Answers
- What is TDS in income tax? TDS stands for Tax Deducted at Source, which refers to the income tax that is deducted from the income at the time it is earned, such as salaries, interest, and other payments.
- How does TDS work? TDS works by having the payer of certain incomes withhold tax before making the payment to the payee. This ensures that tax is collected promptly and reduces the chances of tax evasion.
- What are the TDS rates for different incomes? TDS rates vary based on the type of income, for example, the rate for salaries can range from 10% to 30% depending on the income bracket, while interest income is generally taxed at a rate of 10%.
- Who is responsible for deducting TDS? The deductor, usually the employer, bank, or any entity making a payment subject to TDS, is responsible for withholding the tax and depositing it with the government.