Tax Deducted at Sources (TDS)
Taxes explained in simple terms
Payroll calculations usually constitute 4 main components – Basic pay, Allowances, Deductions, and Savings
What is TDS?
TDS or Tax Deducted at Source, is a means of indirect tax collection by Indian authorities according to the Income Tax Act, 1961. TDS is managed by the Central Board of Direct Taxes (CBDT), which comes under the Indian Revenue Services (IRS). Every salaried person has to pay a certain sum of their salary amount as a tax to the country.
Why is TDS collected?
TDS is collected as a means to keep a stable revenue source for the government throughout the year while desisting people from avoiding taxes.
The various deductions sections such as Section 80D, section 80DD, Section 80 C and much more between Section 80 C of section 80U which provides deductions on various investments such as life insurance policies, Provident Funds, etc. Salary includes your Gross salary, Provident Fund, Insurance, Leave pay, Employee State Insurance and Labour Welfare Fund.
Gross salary is the sum total of Basic pay + Dearness Allowance + House Rent Allowance + Transport Allowance + Special Allowance + Other Allowance.
The Indian Income Tax Act allows for certain deductions which can be claimed to save tax at the time of filling the Income Tax Return by all classes of Taxpayers. These will be deducted from the Taxable salary.