Department of Revenue collects Tax Deduction at Source, commonly known as TDS from Indian taxpayers. TDS is one of the well-known taxes that came into being after the Indian Income Tax Act, 1961 came into being. TDS is one of the single largest source of revenue generation for Government of India. Matters related to TDS come under the jurisdiction of Central Board for Direct Taxes (CBDT).  CBDT is a part of Department of Revenue that comes under Indian Revenue Service (IRS), Ministry of Finance, Govt. of India.

TDS at a Glance:

In simple terms, TDS is the amount that is deducted from the monthly salary of the employee by the employer. The amount is then given as tax to the Union government. Certain types of payments may be exempt from TDS as per rules mentioned under the Act.

To deduct TDS, the income of the employee is bracketed in to various taxable slabs and the net payable Tax as per the Income Tax rule is calculated. The taxable income in various brackets is a definite percentage of the income that falls within that bracket. The net tax is calculated and deducted from the gross salary of the employee and he/she gets the amount with TDS deductions.

The tax that has been deducted by the employee needs to be deposited to the central government treasury in as stipulated amount of time. TDS deducted is considered under the net tax deductions when IT returns are filed during the end of the financial year.

Different types of incomes come under the category of tax deduction at source. TDS is an effective instrument through which central government gets valuable revenue. The types of incomes that on which TDS is applicable are includes income derived from fees for professional and technical services, rent, commission and brokerage, horse races, winnings from lottery, interest on securities, dividend interest, salary, payments to non-residents etc.

Tax Deduction Account Number:

Employees who deduct TDS should first get Tax Deduction Account Number, or TAN. This number serves as a unique identification number for employees. Employees can get TAN number by submitting form no. 49B as mentioned under Income Tax Law. The form can also be submitted online on NDSL website. Tax Information Network Facilitation Center (TIN-FC) also  collect these forms. NSDL has established these centers across India to facilitate TAN application process. (NSDL is an appointed intermediary by the Government of India.)

Types of TDS Certificates:

Salaries- For TDS deductions that have been on salaries, Form 16 is issued as TDS certificate. The form contains Tax deducted & Paid details and other computational details. It refers to details that have been mentioned in Form 24Q.

Non-Salaries – TDS certificates for non-salaried employees are issued through Form 16A that contains deducted & Paid details and other computational details. Depending upon the nature of the payment, separate sections should be prepared.  These sections refer to details that have been mentioned in Form 26Q and Form 27Q.

TCS Certificates – For taxes falling under Tax Collected at Source(TCS), TCS certificates are offered through Form 27D.