Who Is Liable to Deduct TDS

TDS, or Tax Deducted at Source, is an important mechanism under the Indian Income Tax Act that ensures tax is collected at the time of payment itself. But who is liable to deduct TDS? Understanding this helps both businesses and individuals stay compliant with tax regulations and avoid penalties.

Understanding Who Is Liable to Deduct TDS

The person or organisation responsible for deducting TDS is known as the deductor. Under the Income Tax Act, who is liable to deduct TDS depends on the nature of the payment and the type of payer.

• Employers: Every employer who pays a salary to employees is liable to deduct TDS under Section 192, provided the income exceeds the exemption limit.
• Companies and Firms: Businesses paying contractors, consultants, or professionals must deduct TDS on such payments under relevant sections like 194C, 194J, or 194H.
• Government Departments: Central and State Government offices, through their Drawing and Disbursing Officers (DDOs), are also liable to deduct TDS.
• Individuals and HUFs (Hindu Undivided Families): If they are subject to tax audit, they too fall under the category of those who are liable to deduct TDS for specific payments such as rent, commission, or professional services.

Every deductor must obtain a TAN (Tax Deduction Account Number) to file returns and deposit the tax deducted.

Responsibilities of the Person Liable to Deduct TDS

The entity who is liable to deduct TDS has several responsibilities:

• Deduct TDS at the time of credit or payment, whichever is earlier.
• Deposit the deducted amount with the government by the 7th of the following month.
• File quarterly TDS returns.
• Issue TDS certificates (Form 16 or Form 16A) to deductees as proof of deduction.

Failure to comply can attract penalties, interest, or prosecution under the Income Tax Act.

Final Word: Compliance Begins with Knowing Who Is Liable to Deduct TDS

Knowing who is liable to deduct TDS ensures smooth tax compliance and avoids future complications. Whether you’re an employer, business, or government entity, understanding your role as a deductor is key to responsible tax management.