Tax Deducted at Source (TDS)

Tax Glossary Definition

Tax Deducted at Source (TDS)

Collection of Tax at the Point of Income Generation: TDS is a system in which tax is deducted by the payer at the time of making certain payments—such as salary, interest, or rent—and is then deposited with the government on behalf of the recipient. This mechanism ensures regular collection of taxes and reduces the chances of tax evasion.

Example: If an employer deducts ₹10,000 per month as TDS from an employee’s salary, the same amount is remitted to the Income Tax Department against the employee’s PAN.

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