Requirement of Tax Deducted at Source, TDS (Tax Deducted at Source) is require for several reasons:
Revenue Collection:
TDS is a mechanism employe by tax authorities to collect tax revenue throughout the financial year rather than relying solely on tax payments at the end of the year. It ensures a regular inflow of tax revenue and aids in the efficient functioning of the government.
Ensuring Tax Compliance:
TDS helps in promoting tax compliance by ensuring that individuals and entities subject to TDS provisions are making their tax payments. By deducting tax at the source, the responsibility is shift to the payer to ensure tax compliance.
Preventing Tax Evasion:
TDS acts as a preventive measure against tax evasion. By deducting tax at the time of payment.
It becomes difficult for the deduct to avoid or under report their tax liability since a portion of the income has already been withheld and remit to the government.
Widening Tax Base:
TDS helps in widening the tax base by covering a large number of transactions and payments that are subject to TDS provisions. It ensures that even those who are not directly engage in the tax filing process contribute to the tax system through TDS deductions.
Tracking High-Value Transactions:
TDS provisions are often applicable to high-value transactions, such as salaries, interest, rent, professional fees. etc
By mandating TDS on these transactions, tax authorities can keep track of significant financial activities and identify potential tax evaders or those under-reporting their income.
Simplifying Tax Collection:
TDS simplifies the tax collection process by distributing the responsibility of tax deduction and payment among various entities and individuals. It reduces the burden on the taxpayer and facilitates a more efficient tax administration system.
Ensuring Accuracy of Tax Deductions:
TDS helps in ensuring accurate tax deductions by providing a mechanism for deducting tax at the prescribed rates and thresholds. It reduces the chances of underpayment or non-payment of taxes by ensuring that a portion of the income is withheld and remit to the government.
Requirement of Tax Deducted at Source is an essential component of the tax system in many countries.
And serves as an effective tool for tax administration, revenue collection, and promoting tax compliance.
To visit: https://www.incometax.gov.in
