Definition of TDS in Accounting
What is TDS in Accounting? TDS or tax deducted at source is a deduction made by someone while making a payment or crediting the account, whichever is early. This could be your employer, customer or even a bank paying you interest on a fixed deposit. Before making a payment to you, the payer deducts and pays tax on your behalf to the Income-tax department. You can claim/adjust TDS credit while filing your income tax return against income tax payable. You can view the details of the TDS credit in Form 26AS by logging into your income tax filing account.
Also Read:- What Is a Bank Reconciliation Statement?
Who Can Deduct TDS?
Definition of TDS in Accounting. An organization whose book of account is audited and is liable to make payments under TDS is eligible to deduct from a bill paid. Individuals or HUFs cannot deduct TDS as they are not authorized to make such deductions.
The deductor should deposit the TDS in the Government account on and before the 7th day of every month. Different products and services have different rates of TDS deductions.
Also Read:- Rectification in Tally Accounting
Persons Who Are Required To Deduct TDS
The government has notified below persons who are required to deduct TDS for the specified services:-
a) Individual and HUF
An individual and HUF is required to deduct TDS on the specified services if they are engaged in:-
(i) business having turnover of Rs 1 crore or more during the previous financial year or
(ii) profession having receipts of Rs 50 lakh or more during the previous financial year and they are required to get books of account audited under section 44AB
TDS or Tax Deducted at Source at prescribed rates is made mandatory by the Income Tax Act on certain persons responsible for making payments. The tax deducted has to be deposited by them to the government. The recipient of income receives the net amount (i.e. gross income minus direct tax deducted at source).
Also Read:-Bank Statement in Accounting
