In the Income Tax, the main objective of the Act is to levy the tax on the Income of the person and collect the tax from them. For this, the taxpayer is required to file their Income tax returns and deposit the requisite self assessment tax at the time of filing the Income tax return. However, there are certain other taxes also which are called the “Prepaid Taxes” in which the tax shall be deducted and deposited in the same previous year in which it has been deducted and the income is paid to the payee by the payer which is called as Tax Deduction at Source.
Most of us have heard about the concept of TDS through the Form 16 or in the form of TDS being deducted by the Bank of the Fixed deposits of our parents and grand parents or at the time of filing the Form 15G / 15H for the lower deduction / no deduction of tax at source. So now we have the basic understanding of this Prepaid tax. Lets understand the concept of this Tax Deduction at Source.
TDS is the prepaid tax which is deducted and deposited in the same previous year in which the income has been earned. In the case of self assessment tax, when we have to deposit the tax in the relevant assessment year of the previous year. In this case the payer has to deduct the tax at source of the Income of the Payee and deposit the same into the credit of the Government by depositing the Challan 281.
There are total of 33 items of Income on which the tax is required to be deducted at source.
Direct payment of Tax
In certain cases which has been specified in the Act, the payer is not required to deduct the tax at source, the cases of which are as follows:-
a. where the payer is not required to deduct the tax on the source of income as it is not specified in the Chapter XVII of the Act;
b. where the Income tax is not deducted in accordance with the provisions of the Act
In such cases the Payee is required to deposit the taxes on his behalf.
Assess In Default
In case the Payer of the Income does not deduct the Income tax at source or if deducted fails to pay to the credit of the Government then he shall be called as ‘Assessee in default’ and the provisions regarding the default shall apply on him.