All You Need to Know About TDS
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Personal Finance
- Swati Tripathi
- 2022-12-10
- 03 min read
#Tax Deduction

If you are a student preparing yourself for the work life ahead, this piece is for you.

You may be ready with all the skills you need to crack an interview but there’s more that follows. Once you land a job.

Having technical skills and the ability to work and adapt in that environment is one thing. That is what your career is helping you in. But as soon as you step into the working world, you must know some things. Whether you are an employee or a working professional – like your taxes.

The moment your remuneration is finalized, you need to have all the terms clear, including TDS. 

This is paramount to have a clear idea about your finances and know enough to plan your taxes, investments, etc.

TDS is often overlooked while planning finances or is a vague concept to those who don’t come from accounting/taxation background.

If you find these terms and regulations confusing, let me help you out here.

Also read: Startup India- the present and the future

First things first, what is TDS?

TDS stands for Tax Deducted at Source. It is a part of your income tax, deducted at the source of your income, by your employer.

So, does this remain with the person paying you? No. The amount of TDS is paid to government on a monthly basis, as specified in the Income Tax Act.

In simpler words, ideally, as the receiver, you have to pay the income tax. But to ensure prompt collection of taxes and centralized payments made by a single employer, with this provision, the employer pays a certain amount to the government on your behalf.

Also read: GST on basic items: benefits to Government or common man?

Does this mean you're clean of your tax liability?

Not necessarily.

The Tax Deducted at Source is as per a standard rate your employer calculates at the beginning of the year, on an estimated annual income.

At the end of the year, you still have to calculate your actual tax liability. From this, the TDS already deducted and paid to the government is adjusted.

Is tax deducted on every income?

No. The payments made by persons specified in the Income Tax Act are mandated to follow TDS provisions. There are certain exceptions too, where the payment made to certain persons or businesses is not reduced by TDS.

How is the amount of TDS determined?

The Income Tax Act specifies no standard rates to calculate the tax to be deducted. The employer, at the beginning of the year, estimates your annual income and figures out a standard monthly rate for a deduction.

So how do you claim the reduction in tax liability?

Since your employer is paying a part of your tax liability, you only have to pay for the amount due over and above the TDS already paid to the government. But to do that, you need to submit a TDS certificate issued by the employer. This certificate acts as proof that the tax has been deducted by the employer and paid on time.

That said, there are certain responsibilities your employer needs to fulfill too – one of which is filing timely TDS returns.

Also read: A guide on student bank account

What is a TDS return?

TDS return is a statement your employer files with the Income Tax Department quarterly. This statement states important details relating to your income, the tax deducted, the type of payment made, and more.

The TDS return is simply proof of the payment of taxes your employer makes on your behalf to the government.

But what happens if your income falls below the minimum taxable amount?

If your annual income is below the minimum taxable income, and your employer must deduct TDS, you can get a refund from the Income Tax Department. For this, you need to file an Income Tax Return before the specified dates. This return is a statement of your income. It helps you prove all types of income you receive in the financial year, and after all eligible deductions, if any, prove that your ultimate tax liability is zero.

But before we even start with taxation and TDS and more, remember that you need to have your PAN card in place. A Permanent Account Number is an ID issued to you by the Income Tax Department to collate everything related to your taxation under one number and ease tracking and identifying.

If your PAN and bank account details are in place, all you have to take care of is timely payment of taxes and regular filing of these returns.

The Income Tax department has made things much easier for people today – even to the extent of filing one’s returns on its site. 

Contact a tax expert or a CA you know to help you further with this. TDS is an important component of your finances and irrespective of the background you come from, you should have a basic idea about things.


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