GlossaryTaxation
TDS
Tax Deducted at Source
Definition
Income tax that the person making certain payments deducts before paying, and deposits with the government on behalf of the person being paid.
In plain language
Under TDS, tax is collected as income is paid rather than only when the recipient files a return. The payer deducts the tax, deposits it with the government and reports it in a TDS return.
The recipient then receives credit for the tax deducted against their own income tax. Which payments are covered, and at what rates, is set by income tax law.
Example
A business that pays a professional fee may deduct TDS from the payment and deposit it; the professional then sees that tax credited against their own income tax.