Tax Deducted at Source (TDS) is a system introduced by the Indian Income Tax Department to collect tax at the source of income. Any person or business making specified payments (such as salary, professional fees, commission, or rent) must deduct tax before releasing the payment and deposit it with the government.
Deductors must file quarterly TDS returns (Form 24Q, 26Q, or 27Q) by the 31st of the month following the end of each quarter. In addition, TDS certificates (Form 16 or 16A) must be issued to deductees to enable them to claim tax credit during their income tax filings.
Failing to deduct or deposit TDS, or delay in return filing, attracts severe interest obligations and penalties. Section 234E imposes a fee of INR 200 per day for late return submissions, while interest is charged at 1.5% per month for delays in tax deposits.