Curious About TDS? Why We Deduct It and How to Handle Your Claims and Refunds

Understanding the Process of TDS

Can anybody teach me "The process of TDS"?

1. Why are we deducting the TDS?
2. How and where do we need to submit the TDS claims?
3. After receiving the Form 16 of TDS, how and where can I get the same money?

Thank you.

In simple words, everyone is liable to pay tax on income. Suppose I am giving some income to you; then it is your income but my expense. At the end of the year, you will pay taxes on the income paid by me. However, the government needs your tax in advance so that it can generate interest income from it or for any other reason. For that purpose, the government assigns the duty to the employer or payer (as the case may be) to pay tax on behalf of the payee.

As an example, I will pay your taxes by deducting your payment for taxes. This is called TDS.

Changes in Form 16 with the Online Procedure

Now, Form 16 has totally changed as per the online procedure. You may need to understand or read in detail about the following topics:

- Persons Liable to Deduct Tax at Source (TDS)
- Specified Payments on Which TDS is to be Deducted
- Time Limit to Deposit TDS & Issue TDS Certificate
- What is Form 16 (TDS Certificate)?

Understanding Tax Deducted at Source (TDS)

Income tax is paid by individuals who earn income, but it is not feasible for the Revenue Authority to track all individuals with earned income. To address this issue, the Revenue Department introduced a mechanism for collecting income tax in the form of Tax Deducted at Source (TDS).

A company, and others who are liable, undergo a tax audit under the Income Tax Act if certain defined payments are made to a person and the amount exceeds the specified provisions of the Income Tax Act. The TDS deducted by the assessee should be deposited with the revenue department by the 7th of the following month in which it was deducted. If this amount is not deposited, there is a provision for interest on the amount of TDS deducted at a rate of 1.5% per month from the date of deduction.

For example, if a company deducts TDS of Rs. 100/- on 29th September 2015, it should be deposited in the revenue department's bank account on or before 7th October 2015. If the amount is deposited after the due date, there will be an additional interest charge.

Proof of TDS Payment

Form 16 and Form 16A serve as proof of TDS payment for the person from whom the TDS is deducted. Nowadays, Form 16 and Form 16A can be downloaded from TRACES. They serve as proof that the TDS has been deducted and deposited with the revenue department.

Regards,
Manoj Kumar

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