According to Income Tax Act, TDS or Tax Deducted at Source, comes into being when any company or person making a payment is required to deduct tax at source if the payment exceeds certain threshold limits. TDS is deducted at certain rates and these rates are prescribed by the Income Tax Department.
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Any company or person who makes a payment after deduction the TDS is called Tax Deductor. The company or payment that receives the payment after the deduction of TDS is called as Deductee. A deductor is responsible for deducting TDS before he/she makes the payment to the deductee and then deposit the TDS amount to the Government of India. TDS is deducted irrespective of the mode of payment–cash, cheque or credit–and is linked to the PAN of the deductor and deductee.
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TDS can be deducted on the various types of payments and they are as follows: -
2. Interest payments by banks
3. Commission payments
4. Rent payments
5. Consultation fees
6. Professional fees
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TDS is considered as a kind of Advance Tax. It is a tax that is supposed to be deposited to the Government of India in the given time intervals and the responsibility of doing this task is on the shoulders of the TDS Deductor.