Tax Deducted at source is defined in the Income Tax Act 1961, as the process of collection of income tax when any income accrues to an assessee. By definition it means, whenever any person who is earning any income from salary, fees, commission, rent, brokerage or payments for any other services provided – he/she is entitled to receive the net amount after deduction of such tax as per rates prescribed in the Income Tax Act. The payer of such monies has full authority to deduct TDS. The amount so deducted by way of TDS needs to be deposited with the Central Government within prescribed timelines as prescribed by the Income Tax Act, 1961. Usually the assessee at the time of filing his final Income Tax return for the year is entitled to relief from his overall income tax liability to the extent he has paid TDS, upon submission of relevant challans/TDS certificates along with his return of income.
At this point of time, almost all taxable sources of income in India fall within the scope of tax deduction at source. The Act prescribes percentages for deduction for different categories of income and also stipulates the time frame within which TDS needs to be deposited with the Central Government. Usually, TDS deducted has to be deposited within one month of its deduction – however there are few exceptions to this rule.
TDS is basically a regulatory mechanism for overall income tax frame work of the country, whereby the income tax authorities ensure optimum realization of income tax, from all tax payers of the country.