TDS — Tax Deducted at Source
What it means
TDS is a mechanism under the Income-tax Act, 1961 where the payer of specified incomes (salary, interest, rent, professional fees, contract payments) deducts tax at prescribed rates before payment and deposits it with the government on the payee's behalf.
Where you meet it in the CA course
CA Intermediate Paper 3 (Income-tax) covers the main TDS sections (192–194 series); CA Final Direct Tax tests them in depth alongside TCS, returns and consequences of default.
Worked example
A company pays ₹1,00,000 professional fees to a consultant. Under section 194J it deducts 10% (₹10,000) and pays ₹90,000; the consultant claims the ₹10,000 as a credit against final tax liability via Form 26AS.
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Talk to usWhat happens if TDS is not deducted?
The payer faces interest, penalty and partial disallowance of the expense (30% under section 40(a)(ia) for resident payments) until the default is made good.
How does the deductee get credit for TDS?
The deducted tax appears in the deductee's Form 26AS / AIS against their PAN and is claimed as a credit while filing the income-tax return.