Tax deducted at source is one of the modes of collecting income tax from the assesses. Such collection of tax is effected at the source when incomes arises or accrues. Hence, where any specified type of income arises or accrues to any one, the income tax Act enjoins on the payer of such income to deduct a stipulated percentage of such income by way of income-tax and pay only the balance amount to the recipient of such income.
The tax so deducted at source by the payer has to be deposited in the government treasury to the credit of Central Government within the specified time. The tax so deducted from the income of the recipient is deemed to be payment of income tax by the recipient at the time of his assessment.
The person responsible for deducting tax at source is liable to issue a certificate to the person from whom the tax is deducted, so that the person can submit the same to income tax authorities.
What is TAN?
TAN is the TAX Deduction Account Number issued by the income tax department to all persons deducting tax at source. TAN has to be quoted in all relevant challans, tax deduction certificates, TDS return and other notified documents. To obtain TAN through Form 49B,, all persons or organisation are required to apply to the TIN facilitation centers of NSDL.
Who has to deduct tax?
Any person making the payment to third parties as specified in scope and applicability section are required to deduct tax at source.
Who is a deductee?
As per income Tax Act, the tax will be deducted at source based on the prescribed rate on payments made to the third parties, who are assesses (includes individual & HUF as covered U/s 44AB ) carrying on business of following types.
Such tax will be deducted at time of payment or credit, whichever is earlier.
- Hindu Undivided Family(HUF)
- Body Of Individual(BOI)
- Association of person (Aop)
- Co-operative society
- Local authority
- Partnership firm
- Domestic company
- Foreign company
- Artificial judicial person
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