TDS or Tax Deducted at Source was introduced by the Government to collect tax at the source from where any person’s income is generated. The person after deducting TDS is required to report such TDS in the TDS return filing and assessment statement. It facilitates sharing of responsibility of tax collection between the deductor and the tax administration. It ensures regular inflow of cash resources to the Government.
TDS works on the concept that the every person making specified type of payments to any person shall deduct tax at the rates prescribed in the Income-tax Act at source and deposit the same into the Government’s account. However, in case of payment to non-residents persons, the TDS rates specified under the Double Taxation Avoidance Agreement shall also be considered. It also envisages the principle of ‘pay as you earn’. The person who is making the payment is responsible for deducting the tax and depositing the same with the Government, is called ‘deductor’, and the person who receives the payment after the tax deduction is called ‘deductee’.
The deductee from whose income tax has been deducted at source would be entitled to get credit of the amount so deducted on the basis of Form 26AS or TDS certificate issued by the deductor.
In order to comply with the provisions of TDS, every deductor is required to obtain a unique identification number called TAN i.e. Tax Deduction Account Number which is a ten digit alpha numeric number, which is required to be quoted by the deductor in every correspondence related to matters concerning TDS.
Non-compliance of the TDS provisions by any person may have serious implications from disallowance of expenditure on which TDS was not deducted or short deducted to levy of penalty and also imprisonment.
The Income-tax department may call for the books of accounts and other relevant documents in order to verify the compliance of the TDS provisions regarding classification of income, nature of payment, rate of deduction, non-deduction of TDS, date of deduction etc. At this stage, comprehensive representation and litigation support services are also required.
Our team of professionals has in-depth knowledge of the tax regulations in India and TDS return filing and assessment has extensive experience in representing our clients.