19 November 2013, Tuesday
Receiving a raise in salary is one of the happiest moments in one’s life. However just as all good things in life come to an end the taxman is lurking around the corner. This time the problem is tax deducted at source. In life leaving things to chance is more than a gamble. The taxman never takes a chance. Whatever is owed to him is collected even before it reached one’s hands. Think about the provincial slip between the cup and the lip and one’s celebration is cut short prematurely.
What is meant by tax deducted at source?
This is mainly a tax collection mechanism where tax is deducted by one’s employer and directly deposited with the Government. It is assumed that an employee of a company and a tax paying citizen of India will have some tax liability. TDS is deducted directly from one’s salary by the employer. The employer estimates tax liabilities taking into account the maximum tax deductions under Section 80 C, Section 80 D, Section 80 E and other tax saving instruments and deducts a certain amount directly from one’s salary and pays it as income tax to the Government. One then calculates the actual tax liability. If the tax liability is more than the TDS
one pays the balance amount and if the tax to be paid is less than the TDS then one can claim a refund. The Company issues the Form 16 which contains the details of the tax deductions made by one’s employer on behalf of the employee. The Form 16 consists of the income earned in the previous year, tax liabilities as well as the tax deductions. The Form 16 gives the salary for the entire assessment year or for the duration of the stay in the Company. The Form 16 is given by one’s employer in the month of May or June. The deadline for filing the income tax return is July 31st.One needs to make sure that the Form 16 is in one’s hands well in advance of this deadline. The Form 16 consists of the details of the PAN (Permanent Account Number) and the TAN (Tax Deduction and Account Number) of the employer who deducts the tax at source.
How is tax deducted at source?
Tax is mainly deducted from the following income. It may include salary, lottery winnings, interest from savings accounts, fixed deposits and corporate fixed deposits, property, rental fee, interest on securities, dividends from shares and mutual funds, commission and brokerage, fees for professional services, Superannuation funds, debentures and so on.