Introduction of TDS,The concept of Tax Deducted at Source (TDS) was implement to streamline the process of tax collection, enhance adherence to tax regulations, and tackle the diverse issues encountered by tax authorities.
Here are some reasons why TDS was introduced:
Revenue Assurance:
TDS helps in ensuring a steady flow of tax revenue to the government by collecting a portion of the tax liability at the time of payment. It reduces the risk of taxpayers evading or delaying tax payment, thereby improving revenue assurance for the government.
Widening the Tax Base:
TDS helps in expanding the tax base by covering a broader range of taxpayers. It requires tax to be deduct at the source of income.
Regardless of whether the recipient is liable to file tax returns or not. This ensures that income is capture and tax, even if the recipient is not otherwise fulfilling their tax obligations.
Encouraging Compliance:
By deducting tax at the source, TDS encourages compliance with tax laws. It places the responsibility on the deductor to deduct and remit tax on behalf of the deductee.
Ensuring that tax is paid even if the recipient fails to report the income or fulfill their tax obligations.
Preventing Tax Evasion:
TDS acts as a deterrent to tax evasion by reducing the scope for taxpayers to under report their income or avoid tax payment. It provides a means for tax authorities to track income and tax payments, making it difficult for taxpayers to hide their taxable income.
Timely Collection of Tax:
TDS ensures the timely collection of tax by deducting and remitting tax at the time of making payments to the deductee. This helps in avoiding delays or non-payment of taxes and provides a steady flow of tax revenue for the government.
Accuracy of Income Reporting:
TDS helps in improving the accuracy of income reporting by capturing income at the source itself. It ensures that income earned by taxpayers is properly account for and report.
Reducing the scope for under reporting or misrepresentation of income.
Overall, the introduction of TDS aims to simplify tax administration, enhance tax compliance, and improve the efficiency of tax collection processes. It provides a mechanism for tax authorities to ensure that income is appropriately tax and helps in creating a fair and equitable tax system.
To visit: https://www.incometax.gov.in
