what is tds in income tax

Tax Deducted at Source (TDS) is a system introduced by the Indian government to collect tax from the very source of income. Under this system, a person (deductor) who is liable to make payment of specified nature to any other person (deductee) deducts tax at the source and remits the same into the account of the Central Government. The deductee from whose income tax has been deducted at source is entitled to get credit of the amount so deducted on the basis of Form 26AS or TDS certificate issued by the deductor. TDS is deducted from various payments such as rent, commission, professional fees, salary, and interest, and the rates are specified in the relevant provisions of the Income Tax Act or the First Schedule to the Finance Act. TDS is an essential part of the taxation system and has a significant bearing on the post-tax income of taxpayers. It helps in keeping a check on tax evasion and ensures that income tax is deducted in advance from the payments being made. Taxpayers can check the TDS amount in Form 26AS or TDS Certificate issued by the deductor. TDS is a direct taxation mechanism aimed at collecting taxes from the source of income itself or at the time of income payout.