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).