What Is TDS: A Complete Guide to Tax Deducted at Source

What is TDS and why does it matter for taxpayers and businesses in India? TDS (Tax Deducted at Source) is a mechanism under the Indian Income Tax Act where tax is deducted at the point of income generation. For example, employers deduct tax from salaries before paying employees, or clients deduct tax before paying freelancers. This system ensures that tax is collected at the source of income, reducing evasion and improving compliance. TDS applies to various payments such as salaries, interest, rent, professional fees, and commissions. When tax is deducted, the deductor is required to deposit it with the government and issue a TDS certificate to the recipient. Understanding Tax Deducted at Source helps taxpayers know their liabilities, claim credits, and avoid penalties. With accurate record-keeping and timely TDS filing, individuals and companies can maintain compliance with tax regulations and prevent disputes with the tax department