Tax deducted at source (TDS) is the practice of reducing tax evasion and spillage by making it mandatory to deduct TDS from payments at pre-defined rates. Whether your employer pays you salary, or your client pays you fees or the bank pays you interest on deposits; there are clear rules and rates prescribed for deduction of TDS. The payer is required to deduct the TDS and deposit the same with the government of India. The payee receives the amount net of TDS. This is considered as part of tax paid and in case excess TDS has been deducted then one can file returns and claim the refund from the Income Tax Department.
Apart from deducting the tax and depositing the tax in the government account, the deductor is also required to file the TDS return which as to be done in the form of a quarterly statement to the I-T department. Such TDS returns can be filed online, and the same shows up in the Form 26AS of the payee. It is compulsory for the tax deductor to submit TDS returns on time.
The TDS return filed should contain details of the TAN and PAN number of the deductor, PAN number of the payee, amount of tax paid, details of TDS challan, mode of payment etc. To file TDS return the employer or the organization deducting TDS must have a valid Tax Collection and Deduction Account Number (TAN). Any person making specified payments mentioned under the I-T Act are required to deduct tax at source and needs to deposit within the stipulated time. Key payments for which TDS needs to be deducted include: