Mr.A is paying commission to Mr.B. Mr.A will debit these amount as expenditure. This will be income for the Mr.B. Mr.B has to pay tax on this amount. Since Mr.A is debiting this amount as expenditure, he has to deducted 10% from the amount which is payable to Mr.B and should pay only 90% to Mr.B. 10% which was deducted by Mr.A will be deposited to Govt A/c. as TDS of Mr.B. Mr.B when assessment his total tax liability will deduct that TDS amount and only pay the remaining amount. In the whole transaction Mr.B cannot hide his income. And it is the duty of Mr.A to deduct tax of Mr.B and pay to Govt, otherwise he cannot debit that amount.
07 July 2008
TDS is nothing but the deduction of an amount (tax) which the deductee has to pay to the govt on his income earned (ie the amt payable to deductee by the deductor).
The deductor is at obligation to deduct the tax before making certain types of payments to the deductee. He should deposit the amt so deuducted to the IT dept with in specified time.
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