Tax deducted at sources

With the intention of collecting tax as the source of revenue itself, the TDS idea was introduced. According to this idea, a person (deductor) who is required to pay another person (deductee) a payment of a specific sort must withhold tax at source and submit the money to the Central Government. The deductee from whom income tax was withheld at source is eligible to get credit for the amount withheld based on Form 26AS or a TDS certificate given by the withholding agent.

What does TDS mean in terms of income tax?

When a specified payment, such as a salary, commission, rent, interest, or another fee is made, Tax Deducted at Source (TDS) is a specific amount that is subtracted. Tax is withheld at the point of source by the payer, whereas tax obligation lies with the recipient of a payment or income. Because the tax will be taken from the payer at the moment of payment, it reduces tax evasion.

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TDS won't apply to dividend payments made to REITs and InvITs

Dividend payments to REITs and InvITs would no longer be subject to tax deduction at source, according to an announcement made by Finance Minister Nirmala Sitharaman in the Union Budget for FY22 (TDS). This tries to improve observance of tax regulations. There was also a suggestion to collect dividend income's advance tax due following the payment or announcement of a dividend.

Who is obligated to deduct TDS and when should it be done?

(a) TDS will be taken off at the time that you make any type of payment that is listed in the Income Tax Act. However, if you are a single person or a Hindu Undivided Family (HUF), no TDS will be taken, and your records are not required to be audited.

(b) Even if your books are not subject to a tax audit, a TDS at 5% will be taken out of every individual or HUF member's rent payment that exceeds Rs. 50,000. If TDS is needed to be withheld at 5%, you are not required to apply for a Tax Deduction Account Number (TAN).

(c) If you are an employed professional, your employer will deduct TDS in accordance with the relevant income tax slab rates. TDS will be withheld at a 10% rate by the bank where you have a working account. TDS at 20% will be taken off, nevertheless, if they don't have your PAN information. TDS rates are specified under the Income Tax Act for the majority of payments, and the payer deducts TDS in accordance with the rates that are relevant.

(d) If you give your employer proof of your investments and your total taxable income is below the whole taxable level, you won't be required to pay any tax. Therefore, TDS won't be removed in this case. You can also send Forms 15G and 15H to the bank if the total taxable income is less than the total taxable limit. In this case, the bank will not deduct any TDS from your interest earnings.

(e) If your employer requested the investment proof but you did not supply it, the bank may have deducted the TDS; nevertheless, if your total taxable income is less than the total taxable limit, you may file a return and request a refund of the TDS.

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