How to calculate TDS

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Tax deducted at source

tax-deducted-at-source-tds

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Dear Tanuja,

TDS (Tax Deducted at Source) is a method introduced by the Income Tax Department of India to collect tax at the source from where an individual's income is generated. The person making certain payments (like salary, interest, rent, professional fees, etc.) is required to deduct a specific percentage of tax before making the payment to the recipient.

What is TDS?

TDS is deducted under the provisions of the Income Tax Act, 1961. The deducted amount is deposited with the government, and the recipient can claim credit while filing their income tax return.

How to Calculate TDS?

TDS is calculated as a percentage of the payment amount, depending on the nature of the transaction. Here's how:

1. Identify the nature of payment – e.g., salary, contract payment, rent, etc.

2. Check the applicable section and rate under the Income Tax Act.

3. Apply the rate on the payment amount.
   
   

Example:
If a professional fee of ₹50,000 is paid, and TDS @ 10% is applicable under Section 194J:

TDS = ₹50,000 × 10% = ₹5,000

So, you pay ₹45,000 to the professional and deposit ₹5,000 as TDS with the government.

Key TDS Sections & Rates (as per current laws):

Rates may vary based on PAN availability or recent updates.

Laws Governing TDS

• Income Tax Act, 1961

• TDS rules under the Income Tax Rules

• Non-compliance attracts Interest, Penalty, and disallowance of Expenses.

If you need professional help calculating TDS or filing returns, Setindiabiz can be the best option to choose as it provides end-to-end support for TDS compliance, return filing, and corrections.