Who Is Liable to Deduct and Pay TDS Under Income Tax Act?

Who Is Liable to Deduct and Pay TDS Under Income Tax Act?

The payer is liable to deduct and pay TDS to the Government of India for any payment made to taxable individuals. TDS stands for Tax Deducted at Source and it's a mechanism to ensure that people pay their taxes on time. The payer must deposit the TDS into the Government account using a TDS challan. The TDS challan is an official document that details the amount of tax that's been deducted and the date on which it's been deposited.

Under the Income Tax Act, different TDS rates are applicable for various transactions and persons. For instance, salaried employees have their employers deduct TDS from their salaries at a certain rate. Banks also deduct TDS from interest paid on fixed deposits. But what about other individuals who are not salaried employees but earn other types of incomes such as interest on recurring deposits or commission on insurance policies? The answer is, anyone who earns any income that's taxable can be eligible for TDS deduction.

Individuals and HUFs who receive insurance commission may have TDS deducted from them if their total commission exceeds a threshold level. This threshold level is set by the Income Tax Department and varies depending on whether the person is a senior citizen or not.

Individuals who expect their total income in a year to be below the exemption limit can submit Form 15G/15H to avoid TDS deduction. But this is only if they are able to convince the payer that they are not chargeable to tax.

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