Tax Deducted at Source or TDS is a type of direct taxation mechanism applicable to various income that is designed to collect taxes at the very source of income i.e. at the time of income payout. As TDS is deducted right at the source, it helps check tax evasion and also relieves the taxpayer from the burden of paying taxes as a lumpsum at the end of the financial year. So via the TDS mechanism, the government ensures a steady inflow of revenue round the year on one hand and reduces the possibility of year-end financial strain for tax payers.
Tax Deducted at Source – Concept
According to the Income Tax Act, 1961, policies and regulations related to tax deducted at source (TDS) is managed by CBDT (Central Board of Direct Taxes). Tax deducted at source is the part of Indian Revenue Service Department (IRS). A person who is liable to deduct the payment is referred to as deductor and the person from whose account the specified income is deducted is referred to as the deductee.