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Tax Deducted at Source (TDS) - Definition & Meaning

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Tax Deducted at Source (TDS) - Definition & Meaning
December 12, 2023
TDS or Tax Deducted at Source at prescribed rates is made mandatory by the Income Tax Act on certain persons responsible for making payments. The tax deducted has to be deposited by them to the government. The recipient of income receives the net amount (i.e. gross income minus tax deducted at source).

Tax Deducted at Source or TDS is a means of collecting income tax slab rates in India.

The provisions related to TDS are governed by the Income Tax Act of 1961. The law states that any permissible payment shall be paid after deducting prescribed percentage as tax – usually over a range of 1% to 10%.

The individual who receives the payment net of TDS (also known as the Assesse) is required to file return stating the TDS deducted and paid to government during over the relevant period.

TDS is applicable on the following transactions:

  • Transfer of certain immovable propertyother than agricultural land
  • Payment to a contractor / sub-contractor for carrying out any work
  • Rent

The person deducting the TDS (deductor) is required to issue a TDS certificate to the deductee within a specified time.

Non-compliance of TDS is a grave offence and can lead to the following:

  • Raising of demand (for TDS)
  • Charging of interest
  • Levying penalty

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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