TDS (Tax Deducted at Source)

A system where the payer deducts a percentage of tax from payments like salaries, contractor fees, rent, and professional fees before paying the recipient.

Tax Deducted at Source (TDS) is a method of collecting income tax in India. The person making a payment (deductor) deducts tax at the prescribed rate before making the payment and deposits it with the government on behalf of the recipient (deductee).

Common TDS sections:

  • Section 192: Salary payments
  • Section 194A: Interest payments (other than on securities)
  • Section 194C: Contractor payments (1% for individuals, 2% for others)
  • Section 194H: Commission or brokerage (5%)
  • Section 194I: Rent (2% for machinery, 10% for land/building)
  • Section 194J: Professional/technical fees (2% or 10%)

TDS compliance requirements:

  • Obtain TAN (Tax Deduction Account Number)
  • Deduct TDS at the time of credit or payment, whichever is earlier
  • Deposit TDS by 7th of the following month
  • File quarterly TDS returns (Form 24Q for salary, 26Q for others)
  • Issue TDS certificates (Form 16/16A) to deductees

Related Terms

TCS (Tax Collected at Source)

A tax collected by the seller from the buyer at the time of sale for specified goods and transactions, deposited with the government.

GSTIN (Goods and Services Tax Identification Number)

A unique 15-digit alphanumeric code assigned to every registered GST taxpayer in India.

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