TDS is a convenient way of paying tax by employees and they get the benefit of tax payment on their earnings. While filing for Income Tax, the TDS amount is counted as tax paid by the employee. TDS is also helpful for the Government to collect advance tax to ensure that the tax collections occur as soon as income is earned by the employees.
TDS could be deducted by employers only on the income that is mentioned under the head: ‘Salary’ in their pay slips. The tax is deducted as per the rate bracket that a particular income comes under for a particular financial year. At the beginning of the financial year, the employer calculates the total salary for the coming year and the tentative tax liability on the income employee. Any arrear or overage of TDS is adjusted usually in the later months of the financial year. However, if there is excess payment to the government for a financial year, the employer could apply for a refund as per the specified procedure. And, in case the tax deducted from employees as TDS was insufficient, the balance has to be paid by the employee when filing the tax return.