Taxation system in India has been divided into 2 broad categories: –
1. Direct Tax- Tax collected by Government on the Income earned by a person in a Financial Year
2. Indirect Tax- Tax collected by government on supply of Goods & Services
TDS (Tax Deducted at Source) is a Direct Tax system introduced by the Income Tax Department where a person responsible for making specified payments (i.e. TDS is deducted when a person incurs specified expenditures) like Interest, Rent, Commission, Salary, etc is liable to deduct a specified percentage of tax (and pay the same to the govt. on behalf of the person to whom payment is made) before making payment in full to the receiver of the payment.
Further the deductee shall be able to get credit of the tax deducted from his income on the basis of form 26AS or TDS Certificate issued by the Deductor.
As the name suggests, Tax Deducted at Source (TDS) is the concept of deducting tax at its source.
Thus, there are 2 parties involved: –
a. Deductor/Payer (Person who incurs specified Expenditures)
b. Deductee/Payee (Person to whom Income is credited/paid)
Why TDS has been introduced when Income Tax provisions are present to collect Tax on income earned by a person?
Tracking the Unorganized Sector-Deductor is generally the organized sector like Companies or Firms or Individual/HUF liable to get their accounts audited U/s 44AB of the Income Tax Act, 1961. Organized sector has huge expenditures and huge data relating to unorganized sector and thus the Govt. made the organized sector liable for deducting tax as it is difficult to keep a track on the unorganized sector.
Early Tax Realization for budget requirements- Govt. requires funds to operate. Income earned in a FinancialYear is taxed in the AssessmentYear and Govt. requires funds for operational requirements. Thus, the concept of Advance Tax and TDS
Pre-requisites for TDS deduction-
For TDS deduction, deductor must have Tax Deduction Account Number (TAN). It is a 10-digit alpha numeric number. The procedure for application of TAN is very simple and can be done online by filling up Form 49B available on NSDL Site.
Specified Expenditures, Rate of TDS applicable on each specified expenditure, Threshold limit applicable for each specified expenditure for TDS deduction. Furthermore, Timely deduction of TDS, Timely Payment of TDS to the credit of Central Govt., Timely E-Filing of TDS Returns, Issuing TDS certificates are the major compliance burden for an organization liable to deduct TDS on specified expenditures incurred by it.
Furthermore, the financial consequences of late/non- compliance are so high that an organization cannot afford to miss the due dates and thus require a responsible compliance expert who has requisite knowledge and experience to manage the Statutory Compliance relating to TDS.
Now that we have known the importance of TDS as a Statutory Compliance in a business environment and that it is a very valuable skill for which organizations are willing to pay a handsome amount, it is strongly recommended that you skill yourself up in this field with proper training by professionals who have experience and expertise.
Furthermore, Tally.ERP 9 and M.S. Excel can be used simultaneously to help in smoother execution of TDS Compliance
SKILLSHORT provides you with an opportunity to get trained in TDS Compliance (i.e. the relevant sections and provisions for TDS Deduction, relevant due dates for compliance and consequences for non-compliance) by Qualified Chartered Accountants having both expertise & experience in the subject and that too at an affordable cost.