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What is TDS?

TDS means Tax Deducted at Source.

It is a tax which is to be deducted on some expenses and payments

As per Income Tax Act, persons responsible for making payments are required to deduct TDS at different rates.



Suppose Max Ltd provided Consultancy Service to ABC Ltd for 40000

In this case,ABC will pay Max Rs 40000.

However,if in this cases,TDS @ 10% is to be deducted, then ABC will deduct 4000,and  pay Max only 36000

ABC will deposit this 4000 TDS with Government


  Meaning of TDS - Cases where TDS is Applicable or not


Why this tax called Tax Deducted at Source?

Source of Income of Max is Amount to be received by ABC

Tax has been deducted at this source by ABC


Who is Deductor and Deductee ?

  • Deductor is the person who deducts tax at source (ABC)
  • Deductee is the person whose tax was deducted.(Max)



Duties of Deductor

  • Deduct TDS
  • Deposit TDS
  • File TDS Return
  • Issue TDS Certificate


Duties of Deductee

  • Issue Bill
  • Collect payment
  • Collect TDS Certificate
  • Check TDS Deducted Online
  • Adjust TDS with his Income Tax Liability while filing ITR


Difference between Income Tax and TDS

Income Tax


When we deposit our own Tax, it is called Income Tax

When we deduct some other person tax and deposit it, it is called TDS


  1. Tax Practical
  2. Practical TDS (Non Salary)
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About the Author

CA Maninder Singh's photo - Expert in Practical Accounts, Taxation and Efiling
CA Maninder Singh
CA Maninder Singh is a Chartered Accountant for the past 8 years. He provides courses for Practical Accounts, Taxation and Efiling at teachoo.com .