What exactly is TDS and what does it stands for?

Glossary
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1

I am really unsure about what is TDS and what does it stands for?

2

TDS stands for Tax Deducted at Source. It is a system introduced by the Income Tax Department of India to collect tax at the very point where income is generated.

3

Hii there, when I first heard the term TDS, it felt like just another financial abbreviation but once I understood it, managing taxes became much easier. TDS stands for Tax Deducted at Source, and it’s essentially a way for the government to collect tax right when income is generated, rather than waiting until year-end.

What Exactly Is TDS?

TDS (Tax Deducted at Source) is a system in which a certain percentage of your income is deducted by the payer before the money is credited to you.

This applies to earnings like salary, bank interest, rent, professional fees, etc.

So if you receive a salary, your employer may deduct tax each month and deposit it with the government on your behalf. You can later view these deductions in Form 26AS/Annual Information Statement (AIS) on the Income Tax portal.

Why Is TDS Important?

• Ensures timely collection of tax.

• Reduces the burden of paying a lump-sum tax at year-end.

• Helps prevent tax evasion.

• Allows taxpayers to claim credit for already-deducted tax when filing returns.

In simple words, TDS = A small tax that gets deducted when you earn, instead of after you earn.

Here’s the official website link for the Income Tax Department of India, where you can find detailed info about Tax Deducted at Source (TDS):