Tax Deducted at Source (TDS) payable refers to the amount of tax that a person or entity is required to deduct from certain payments made to others and remit it to the government. TDS is a system implemented by tax authorities to ensure a steady flow of tax revenue and to prevent tax evasion. It is applicable to various types of payments such as salaries, interest, rent, professional fees, commission, and more.
The person or entity responsible for deducting TDS, known as the “deductor,” deducts a specific percentage of the payment as per the rates prescribed by the tax authorities. The deducted amount is then deposited to the government’s account on behalf of the recipient of the payment, known as the “deductee.”
TDS payable is the net amount that the deductor is liable to remit to the government after deducting the TDS from the payments made to various deductees. The deductor is required to file TDS returns and provide TDS certificates (Form 16 for salaries and Form 16A for non-salary payments) to the deductees, indicating the amount of TDS deducted during the relevant period.
The rates at which TDS is deducted can vary depending on the nature of the payment and the total amount of the payment. The deductor is required to deduct TDS at higher rates if the deductee does not provide their Permanent Account Number (PAN) or provides an incorrect PAN.
The TDS payable is credited to the government’s account using the appropriate Challan (typically Challan 281) and the relevant TDS return is filed by the due date. Failure to deduct or remit TDS can attract penalties and interest charges.
It’s essential for businesses and individuals acting as deductors to comply with TDS regulations diligently to avoid any legal consequences and to ensure smooth and accurate tax compliance. For deductees, TDS acts as a pre-payment of their tax liability, which can be adjusted against their total tax liability when they file their income tax return for the relevant financial year.
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