What does the abbreviation TDS mean in Indian tax practice?
A Tax Deducted at Source
B Tax Declared in Statement
C Total Deduction Schedule
D Tax Deposit Summary
Answer: A. Tax Deducted at Source. TDS stands for Tax Deducted at Source, a collection mechanism under specified tax provisions.
What is the basic purpose of TDS?
A Exempt every receipt
B Collect tax during payment
C Replace annual tax returns
D Set the taxpayer’s age
Answer: B. Collect tax during payment. TDS collects tax when specified income is paid or credited, subject to the applicable provisions.
Who is generally called the deductor?
A Person receiving the payment
B Taxpayer claiming a refund
C Person required to deduct tax
D Bank holding an account
Answer: C. Person required to deduct tax. A deductor is the person responsible under law for deducting tax from a specified payment or credit.
Who is the deductee in a TDS transaction?
A Person filing the TDS statement
B Government tax officer
C Person issuing a PAN
D Person whose income faces deduction
Answer: D. Person whose income faces deduction. The deductee is the person from whose income tax is deducted at source.
After withholding TDS, what must the deductor generally do?
A Deposit it with government
B Keep it as business income
C Return it to the payer
D Convert it into a deduction
Answer: A. Deposit it with government. The deductor must deposit tax withheld with the government within the applicable time.
Does TDS automatically make the underlying income exempt?
A Yes, TDS income is exempt
B No, it is tax collected
C Only salary becomes exempt
D It cancels the income
Answer: B. No, it is tax collected. TDS is tax collected in advance; the underlying income still receives its tax treatment under law.
Why is TDS reconciled when filing an income-tax return?
A To remove taxable income
B To change the tax year
C To credit tax already paid
D To create a new deduction
Answer: C. To credit tax already paid. The taxpayer compares TDS with the final liability so the tax already paid is credited correctly.
For many non-salary payments, when is TDS generally triggered?
A Only when cash is received
B At the end of year
C After filing the return
D Earlier of credit or payment
Answer: D. Earlier of credit or payment. For specified payments, the earlier of credit or payment generally triggers TDS, subject to the relevant provision.
When is TDS on salary generally deducted?
A At the time of payment
B Only after the tax return
C When a bonus is declared
D At the end of March
Answer: A. At the time of payment. The Income Tax Department states that salary TDS is governed by the date salary is paid.
Is TDS required on every payment between two people?
A Yes, every transfer qualifies
B No, specified rules apply
C Only if paid online
D Only for businesses
Answer: B. No, specified rules apply. TDS applies to specified payments when the applicable statutory conditions and thresholds are met.
What determines the applicable TDS rate for a payment?
A The recipient’s bank
B The invoice colour
C The governing provision and facts
D The payer’s preferred rate
Answer: C. The governing provision and facts. The relevant TDS provision sets the rate and threshold for a payment category.
What does a TDS threshold generally determine?
A The final refund amount
B A taxpayer’s residence
C The return’s due date
D When deduction provisions apply
Answer: D. When deduction provisions apply. A statutory monetary threshold can determine whether TDS must be deducted for a specified category.
Why should a deductor classify a payment correctly?
A Different provisions may apply
B Every payment uses one rate
C Classification creates an exemption
D It changes the payee’s PAN
Answer: A. Different provisions may apply. Payment classification matters because provisions, thresholds, and rates can differ.
What number identifies a tax deductor for TDS reporting?
A GSTIN
B TAN
C IFSC
D CIN
Answer: B. TAN. TAN is the Tax Deduction and Collection Account Number used to identify deductors in relevant tax reporting.
What should a TDS statement generally show?
A Only the payer’s profit
B The recipient’s expenses
C Deductee and tax details
D The bank’s branch code
Answer: C. Deductee and tax details. TDS reporting records relevant deductee, payment, deduction, and deposit details.
Why does a deductor issue a TDS certificate?
A To approve a tax exemption
B To replace the ITR
C To set a tax slab
D To document tax deducted
Answer: D. To document tax deducted. A TDS certificate documents the amount deducted and reported for the payee.
Which certificate is commonly issued for salary TDS under the 1961 Act?
A Form 16
B Form 26QB
C Form 10-IEA
D Form 141
Answer: A. Form 16. Form 16 is the familiar salary TDS certificate under the 1961 Act framework.
Which certificate is commonly used for non-salary TDS under the 1961 Act?
A Form 16
B Form 16A
C Form 26AS
D Form 141
Answer: B. Form 16A. Form 16A is commonly issued for TDS on non-salary payments under the old framework.
Where can a taxpayer review TDS information reported by deductors?
A Only a bank passbook
B A GST registration page
C AIS and tax records
D A credit-card statement
Answer: C. AIS and tax records. TDS details can be checked in official tax information such as AIS and the applicable tax records.
Which official statement is associated with TDS credits for FY 2025–26?
A Form 168 for TY 2026–27
B A GST annual return
C A bank interest letter
D AIS for AY 2026–27
Answer: D. AIS for AY 2026–27. The Department says TDS for FY 2025–26 is reflected in AIS for AY 2026–27 under the old Act.
For Tax Year 2026–27, which information statement does the transition FAQ identify?
A Form 168
B Form 16
C Form 26AS only
D Form 26QB
Answer: A. Form 168. The Department’s transition guidance identifies Form 168 for information relating to Tax Year 2026–27 under the 2025 Act.
If TDS in a return does not match AIS, what should the deductee do first?
A Delete the income entry
B Inform the responsible deductor
C Claim a larger credit
D Ignore the mismatch
Answer: B. Inform the responsible deductor. The Department advises promptly informing the employer or deductor responsible for the TDS.
How does a deductor generally correct a reported TDS mismatch?
A Ask payee to alter AIS
B Cancel the original payment
C File a correction statement
D Change the taxpayer’s PAN
Answer: C. File a correction statement. The deductor can file a revised TDS return or correction statement to fix reported errors.
If TDS was deducted but does not appear in records, what should the payee check?
A Only the bank balance
B The tax slab chart
C The employer’s address
D Deductor’s filing and deposit
Answer: D. Deductor’s filing and deposit. The payee should reconcile the records and contact the deductor, who may need to correct the TDS statement.
Is a TDS credit determined only by the date the deductor deposits tax?
A No, income period matters
B Yes, deposit date controls
C Only the certificate date matters
D It is always next year
Answer: A. No, income period matters. The Department explains that credit is linked to the period in which the income is assessable, provided reporting is correct.
How does TDS differ from TCS?
A TDS applies only to imports
B TDS is deducted; TCS collected
C TCS is a tax refund
D Both are income exemptions
Answer: B. TDS is deducted; TCS collected. TDS is deducted from specified payments; TCS is collected by a seller or collector under separate provisions.
Who typically collects TCS under a TCS provision?
A The deductee’s employer
B The tax-return preparer
C Seller or specified collector
D The receiving bank only
Answer: C. Seller or specified collector. TCS provisions require specified sellers or collectors to collect tax on covered transactions.
What date chooses the governing Act during the TDS transition?
A TDS certificate issue date
B Return filing date
C Tax deposit date
D Earlier credit or payment date
Answer: D. Earlier credit or payment date. For most TDS obligations in the transition, the earlier event of credit or payment determines the applicable Act.
A payment or credit occurs on 31 March 2026. Which Act generally governs TDS?
A Income-tax Act, 1961
B Income-tax Act, 2025
C Companies Act, 2013
D GST law alone
Answer: A. Income-tax Act, 1961. The Department says an earlier credit or payment on or before 31 March 2026 is governed by the 1961 Act.
A covered payment is credited on 1 April 2026. Which Act generally applies?
A Income-tax Act, 1961
B Income-tax Act, 2025
C No tax law applies
D The GST Act
Answer: B. Income-tax Act, 2025. TDS events occurring on or after 1 April 2026 are governed by the Income-tax Act, 2025.
What does the new Act do to many TDS provisions?
A Removes all TDS
B Moves TDS into GST
C Consolidates them in section 393
D Makes every payment exempt
Answer: C. Consolidates them in section 393. The 2025 Act consolidates many TDS provisions under section 393 in a simplified table.
Did the 2025 Act transition itself change TDS rates and thresholds?
A Yes, all rates doubled
B Only salary rates changed
C All thresholds were removed
D No, they were retained
Answer: D. No, they were retained. The Department says the new Act retained TDS rates and monetary thresholds during the transition.
Why can an old section number on a new-period TDS return cause trouble?
A It may create processing errors
B It changes the payee’s income
C It grants an exemption
D It cancels the TDS
Answer: A. It may create processing errors. The Department warns that old section references for post-transition payments may cause processing errors.
If March 2026 TDS is deposited after 1 April, can credit still appear for AY 2026–27?
A No, deposit is too late
B Yes, if reporting is correct
C Only under the new Act
D Only after a refund
Answer: B. Yes, if reporting is correct. The Department says March 2026 TDS can be credited to AY 2026–27 even if deposited later, provided the deductor files the correct statement.
For salary paid on 31 March 2026, which Act governs TDS?
A Income-tax Act, 2025
B Both Acts equally
C Income-tax Act, 1961
D No salary TDS applies
Answer: C. Income-tax Act, 1961. Salary TDS is deducted at payment, so salary paid before 1 April 2026 is governed by the 1961 Act.
For salary paid on 30 April 2026, which Act governs TDS?
A Income-tax Act, 1961
B The GST Act
C No salary TDS applies
D Income-tax Act, 2025
Answer: D. Income-tax Act, 2025. Salary paid on or after 1 April 2026 is governed by the 2025 Act.
What section does the transition FAQ identify for salary TDS in Tax Year 2026–27?
A Section 392(1)
B Section 194C
C Section 123
D Section 202
Answer: A. Section 392(1). The Department identifies section 392(1) of the 2025 Act for salary TDS in Tax Year 2026–27.
What should employers do when starting salary TDS for Tax Year 2026–27?
A Continue prior-year totals unchanged
B Reset the calculation from April
C Use only March salary
D Ignore regime information
Answer: B. Reset the calculation from April. The Department instructs employers to reset salary TDS computation from 1 April using the new tax year’s projected income and relevant details.
Why must deductor payroll systems be updated for the new Act?
A TDS was abolished
B All salaries became exempt
C Section numbers and reporting changed
D PAN is no longer used
Answer: C. Section numbers and reporting changed. The Department says systems must reflect the new section numbering, terminology, and reporting requirements.
For specified transactions from 1 April 2026, which common TDS-cum-challan form is identified?
A Form 26QB
B Form 16A
C Form 10-IEA
D Form 141
Answer: D. Form 141. The Department says Form 141 may be used for specified challan-cum-TDS transactions under the 2026 rules.
What happens to old-format TDS corrections for periods before April 2026?
A They remain under old framework
B They must use new sections
C They are automatically cancelled
D They become tax credits
Answer: A. They remain under old framework. The Department says correction statements for periods governed by the 1961 Act continue under the old framework.
During the transition, what can the e-TDS return utilities support?
A Only new-format returns
B Old and new formats
C Only paper filings
D No correction statements
Answer: B. Old and new formats. The Department says utilities and TRACES support old formats through March 2026 and new formats from April 2026.
What may happen when a deductor does not deposit tax deducted by the due date?
A The payee’s income disappears
B The TDS becomes exempt
C Interest and other consequences
D The return is waived
Answer: C. Interest and other consequences. Late or missing deposits can trigger interest, recovery, penalty, or other consequences under applicable provisions.
How may a deductor be treated after failing to deduct or deposit required TDS?
A As a tax-exempt person
B As the deductee
C As a tax credit
D As an assessee in default
Answer: D. As an assessee in default. Failure to comply may cause the deductor to be treated as an assessee in default and face statutory consequences.
If the deductee reports the income and pays tax, does that always erase the deductor’s interest liability?
A No, interest may remain
B Yes, all liability ends
C Only if salary was paid
D No, the income is exempt
Answer: A. No, interest may remain. The Department says a deductor may avoid default treatment in specified circumstances, but can remain liable for interest for the delay.
Should a deductee claim TDS that is absent from tax records without checking?
A Yes, claim every amount
B No, reconcile it first
C Only if cash was paid
D Yes, double the credit
Answer: B. No, reconcile it first. Check AIS and certificates, then resolve missing or incorrect entries with the deductor before relying on the credit.
Does the TDS certificate replace filing an income-tax return?
A Yes, for every taxpayer
B Only for salary earners
C No, it supports tax records
D Only without refund
Answer: C. No, it supports tax records. A TDS certificate supports tax records but does not replace a return required under applicable law.
What should a deductee compare before claiming TDS credit?
A Only the bank’s SMS
B The tax slab and PAN
C Rent receipts and HRA
D Certificate, AIS, and income
Answer: D. Certificate, AIS, and income. Reconcile the certificate, official tax information, and the income reported for the relevant assessment or tax year.
Why should an employer use the correct regime and projected salary for TDS?
A Withholding estimate depends on them
B They change the employee’s PAN
C They remove all deductions
D They replace the annual return
Answer: A. Withholding estimate depends on them. Salary TDS computation uses projected salary and applicable tax choices and rules for the relevant tax year.
What is the key TDS compliance principle for a payment?
A Deduct tax from every transfer
B Use correct law and report
C Use last year’s section number
D Skip deposit if certified
Answer: B. Use correct law and report. Correct classification, timing, deduction, deposit, and reporting are all essential to TDS compliance.