A city needs support to ensure its survival.
It needs water resources, electricity facilities, gas supply, advanced technology, hospital and medical care, metro and transportation services, and so much more.
But who pays for all of this?
You might answer that the government pays for it. Yes, that’s true, but the money comes from the earning citizens like you. How, so? Well, this is where TDS comes into the picture.
If you are feeling confused, don’t worry. We will explain the TDS full form, what it is and how it benefits you.
What is TDS Full Form & Why Should I Know About It?
Given that the TDS full form is tax deduction at source, it implies that this amount is subtracted right at the source of the payment itself.
To get a better understanding of this situation, consider the following example:
- Suraj decided to open a business, and for that, he rented space from Shivangi. Now, Shivangi demanded that the monthly rent be fixed at Rs 30,000.
- Now it was also noted that the TDS interest rate for this rent was 10%.
- So, every month, before Suraj pays Rs 30,000 to Shivangi, he has to pay 10% TDS. That means Suraj has to pay Rs 3,000 as TDS to the government and the rest Rs 27,000 to Shivangi.
Now, the question arises: where all does a TDS deduction hold applicable?
Where All Can TDS Be Deducted & Who Does It?
Now that you know the TDS full form & what its, it is important for you to be aware of in what all cases TDS is deducted. Listed below are some of them:
- A TDS deduction is due if you are providing payment to someone, as clarified under the Income Tax Act.
- A TDS deduction is again due in the matters of rent payment. However, this is applicable if the rent amount is more than Rs 50,000. In such a case, a 5% TDS is deducted when the rent is paid. This holds true even if your records are not eligible for a tax audit.
- A TDS deduction is due if you are a professional employee, working for a business. Your boss will accordingly deduct TDS as per the specified income tax bracket rates. There are different TDS interest rates for different salaries. If you earn less than 2.5 lakhs, you are not eligible for TDS. However, if you have an earning between 2.5 lakhs and 5 lakhs, then the TDS interest rate is 5%. This is higher for those who have their salaries between 5 lakhs and 10 lakhs. For them, the TDS interest rate stands at 20%. For those earning more than 10lakh, there is a TDS interest rate of 30%.
- You are required to pay TDS even if you win in a competition or a lottery game.
- If you are a commissioning agent, brokering deals between two parties, then a TDS due is applicable for you as well. You need to pay TDS for each commission you earn.
How Do I Benefit From TDS?
You know the TDS full form. You are aware of what it is and where all it is applicable. Now, it is time you also understand why paying TDS is important and how it is actually beneficial for you.
TDS Ensures There Is No Deceit/Cheating Involved
The whole TDS system has been designed to ensure complete transparency between you, the taxpayer, and the government. This is because it allows the government to monitor the taxpayers and prevent any illegal tax evasion.
TDS Provides the Government with Much Needed Funds
As mentioned before, a city needs resources to survive. It needs proper water, electricity, gas supply, transportation and many other facilities. But to have all of these in place, one needs to spend the necessary money for it. This is why TDS is important for the government. It uses TDS, taken from working employees and other people, and spends it on public welfare projects.
TDS Ensures The Tax-Filing System Is Easy & Convenient
The TDS system has been made in a way that TDS due is automatically deducted at the source. This prevents any unnecessary hassle of keeping a record of when and how to submit taxes.
You can visit Investment Simplified to know more about TDS, taxes and other investment-related concerns.
Now that you know the TDS full form, you also understand that TDS is subtracted right at the source of the payment. So, if you are making a payment to someone, you need to deduct TDS as per the TDS interest rate specified by the government. This is crucial since this TDS constitutes the funds the government needs for public welfare projects.