Taxation at source

Tax Glossary Definition

Taxation at source

Taxation at source refers to the deduction of taxes from income at the time it is earned or received, rather than at a later point when a tax return is filed. This ensures that the tax is collected at the source of income, rather than waiting for the employee to pay it later through a tax return.

Example: An employer pays a monthly salary of ₹50,000 to an employee. Before disbursing the salary, the employer deducts ₹5,000 as Tax Deducted at Source (TDS). The employee receives a net salary of ₹45,000, while the ₹5,000 TDS is remitted to the government on the employee’s behalf. 

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