Tax Deducted at Source (TDS) is an indirect method of collecting Income Tax. TDS is based on the principle of “Pay as you earn” which is beneficial for both the Government and the taxpayer. Tax Deducted at Source (TDS) is a concept where a person making payment of specified nature is liable to deduct tax at source at a prescribed rate and deposit the same with the Government. This ensures continuous revenue for Government by way of Tax Deducted at Source and not at the end of the year when you assess your income and pay tax before filing the income tax return.
The person receiving payments after-tax are entitled to the tax credit of the amount so deducted. This tax credit can be claimed on the basis of the TDS Certificate (Form 16/16A) which is issued by the deductor or Form 26AS of a taxpayer.