TDS is the word used in the context of income tax, full form of TDS is Tax Deducted at Source. While paying income tax one pays tax after receiving income but in case of TDS tax is deducted first and then one gets income so in simple terms one can say that TDS is like advance tax. Given below are some of the examples where TDS is deducted –
- Employers cut TDS while paying salaries to their employees when the salary exceeds the level where the employee comes under tax bracket.
- Banks also cut TDS on interest which they pay to its fixed deposit holders, if the interest income on fixed deposit by an individual exceeds 10000 rupees then TDS is deducted on excess interest income. Rate of TDS is 10 percent, however if the individual has fixed deposit in two banks then income from interest from both the banks is not clubbed so if an individual who has 10 lakh rupees do not want to pay tax deducted at source then instead of making fixed deposit in one bank he or she can make fixed deposit in 10 banks and hence there will be no TDS on interest income (assuming rate of interest on deposit is 9 percent).