Understanding TDS: What Every Business Owner Should Know
Priya Sharma
July 30, 2024
Tax Deducted at Source, or TDS, is a mechanism introduced by the Income Tax Department of India. Its purpose is to collect tax at the very source of income. As a business owner, you will be both a deductor (when you make payments) and a deductee (when you receive payments).
When is TDS Deducted?
TDS is required to be deducted on certain types of payments when they exceed specified threshold limits. Common examples include:
- Salaries to employees
- Payments to contractors and professionals
- Rent payments
- Commission and brokerage
- Interest payments
Filing TDS Returns
Once you deduct TDS, you must deposit it with the government and file TDS returns on a quarterly basis. Failure to do so can lead to interest and penalties. The forms used for TDS returns are Form 24Q (for salaries) and Form 26Q (for non-salary payments).
Key Takeaway
TDS compliance is a continuous activity that requires careful record-keeping and adherence to deadlines. Using a compliance tool to track due dates for TDS payments and return filings can save you from significant financial penalties.