TDS (Tax Deducted at Source) is a mechanism used in India for collecting income tax at the very point of income generation. Under this system, the individual or organization responsible for making specific types of payments—such as salaries, rent, interest, or commissions—is required to deduct a certain percentage as tax before making the payment to the recipient. This deducted amount is then submitted to the government.

The entity that deducts the tax is referred to as the “deductor,” while the person receiving the income is known as the “deductee.” The main objective of TDS is to ensure a steady inflow of revenue to the government and to simplify the tax collection process by collecting tax in advance.

TDS rates vary depending on the nature of the payment and the recipient’s income bracket. The amount deducted is considered an advance payment of tax and is adjusted against the final tax liability of the deductee when they file their income tax return.