Tax Deducted at Source (TDS) is a means of collecting income tax in India, under the Indian Income Tax Act of 1961. Any payment covered under these provisions shall be paid after deducting prescribed percentage. It is managed by the Central Board for Direct Taxes (CBDT) and is part of the Department of Revenue managed by Indian Revenue Service. It has a great importance while conducting tax audits. Assessee is also required to file quarterly return to CBDT. Returns states the TDS deducted & paid to government during the Quarter to which it relates. The income tax authorities look upon with favour at those servicing a housing loan from specified financial institutions. It is up to you to be wise enough to take advantage of the home loan facilities provided by them.
When put in figures, this is quite an amount:
Assume taxable income of Rs 4 lakh, placing the assessee in the highest tax bracket.
Assume interest payment during the first financial year is Rs 1.60 lakh.
Taxable income stands reduced to Rs 2.5 lakh (Rs 4 lakh - Rs 1.5 lakh being the maximum limit).
Total tax amounts to Rs 49,980 (tax of Rs 49,000 + surcharge of Rs 980).
Tax saved is Rs 45,900 (tax @30% on Rs 1.5 lakh plus 2% surcharge as the investor is in the highest tax bracket)That brings us to Section 88 of the Income Tax Act.