Understanding TDS: What is Tax Deducted at Source?

Learn what TDS is and how it works with examples. Simplify your tax compliance today!

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TDS (Tax Deducted at Source) is a legal requirement where tax is deducted before a specific payment is made. For example, when you earn interest from a bank, the bank deducts a percentage as TDS before crediting the interest to your account. This deducted amount is then remitted to the government. TDS ensures regular revenue stream to the government and simplifies tax compliance for individuals.

FAQs & Answers

  1. What does TDS stand for? TDS stands for Tax Deducted at Source, which is a legal requirement for tax deduction before certain payments are made.
  2. How is TDS calculated? TDS is calculated as a percentage of the payment amount, and the rate varies based on the type of income or payment being made.
  3. When is TDS deducted? TDS is deducted at the time of payment. For example, if you receive interest from a bank, TDS is deducted before the interest is credited to your account.
  4. What happens to the TDS that is deducted? The deducted TDS amount is remitted to the government by the entity responsible for making the payment, thus acting as a source of revenue for the government.