The Income-tax Law has incorporated a system of deduction of tax at the point of generation of income for the quick and efficient collection of the taxes. This system is known as the “Tax Deducted at Source”, commonly known as the TDS. Under this system of TDS, the tax is deducted at the origin of the income.
The tax is deducted by the payer, and the same is remitted to the Government by the payer on behalf of the payee.
The provisions related to the deduction of tax at source are applicable to the following payments: –
- Salary
- Interest,
- Commission,
- Brokerage,
- Professional fees,
- Royalty,
- Contract payments, etc.
In respect of the payments to which the TDS provisions apply, the payer has to deduct the tax at source on the payments made by him, and he/she has to deposit the tax deducted by him to the credit of the Government.