What is Tax Deducted at Source?

What is Tax Deducted at Source?

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what is tax deducted at source

Tax deducted at source

Tax deducted at source is an indirect method of collecting tax at the very source of income. For government is a regular and wider base of tax net. The rate of tax to be deducted is specified by the income tax department every financial year.

Capital gains tax

A capital is something which generates income, (movable or immovable) it can be property or car or equipment. You make profit by selling these capital assets (gain) so, you have to pay tax for the profit you earned. This is called capital gains tax. Yes, shares of a company are also included in capital gains tax.

Who pays capital gains tax?

Seller or buyer

Suppose you have an acre of land worth 1 crore and you are willing to sell it for 2 crore thus making a profit of 1 crore and have to pay 10 lakhs as capital gains tax to government. Now, you don’t actually pay 10 lakhs instead ask the buyer to give only 1 crore 90 lakhs and ask him to pay the government on behalf of you. This concept is called tax deduction at source.

You might recall “Vodafone essar case” which is outcome of tax deduction at source (the case out rightly rejected by the Supreme Court).

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Sriram Nandipati is a graduate in Economics from Andhra Pradesh. He has a passion towards writing social issues and gender issues. He is currently working a case study on "tribal welfare and the government schemes". He is full of philanthropic ideas...

2 COMMENTS

  1. I’ve been in situations where my employer has deducted tax from my pay packet before it is deposited into my bank. They always give a record of how much tax they took, before you got your money. This goes for buying and selling things, too.
    I like this way better – there is always a record that you can submit to the taxation department. But you don’t have the headache of thinking about having to pay your tax all year around. I’d highly recommend “paying your tax as you go”. You can always apply for a refund if your tax has been overpaid (this is a great way of saving money too!!)

  2. When tax is deducted at its source, tax cannot be levied again. So why does the common man has to pay tax every time at the purchase of any device? Why are these taxes put on the common man there by increasing the cost of the object.

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