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WHY DO I HAVE TO PAY TDS EVEN WHEN TDS WAS DEDUCTED FROM MY INCOME?

Tax Deducted at Source (TDS) is a mechanism through which taxes are deducted by the payer (such as an employer or a financial institution) at the time of making certain payments, such as salary, interest, rent, or professional fees. TDS is deducted as per the provisions of the Income Tax Act and is based on the rates specified by the tax authorities.

While TDS is deducted from your income, it is not the final tax liability. The purpose of TDS is to collect a portion of the tax liability in advance, directly from the source of income, to ensure a steady flow of tax revenue for the government. The actual tax liability is determined based on the total income earned during the financial year, which includes various sources of income, deductions, exemptions, and tax slabs applicable to different income levels.

The TDS deducted from your income is considered as a payment made towards your overall tax liability. When you file your income tax return, you need to calculate your total tax liability based on your income and claim credit for the TDS already deducted. If the TDS deducted is equal to or more than your tax liability, you may not have to pay any additional tax. In such cases, you may be eligible for a tax refund if the TDS amount exceeds your actual tax liability.

However, if the TDS deducted is less than your total tax liability, you would need to pay the remaining tax amount at the time of filing your income tax return. This can happen if you have other sources of income, deductions, or exemptions that were not considered when TDS was deducted or if the TDS rate was lower than your applicable tax rate.

It's important to note that TDS is just a prepayment of taxes, and the final tax liability is determined based on your total income and applicable tax rules. Filing your income tax return allows you to reconcile your actual tax liability and claim any additional deductions or exemptions, resulting in the final determination of your tax payable or refundable amount.