Test: Deducted at Source - UGC NET MCQ

Statement 1 is incorrect because TCS rates vary based on the type of goods or services, with specific rates outlined for different items.
Statement 2 is correct as the seller is indeed required to file TCS returns quarterly using Form 27EQ. Therefore, the correct answer is Option B.

The primary purpose of Tax Deducted at Source (TDS) is to collect taxes at the source of income. This means that when payments are made, a portion of the tax is deducted by the payer before the amount is transferred to the receiver. This system helps ensure that tax is collected efficiently and reduces the risk of tax evasion, as the government receives tax revenue directly at the time of payment. An interesting fact about TDS is that it applies to various types of income, including salaries, interest, and dividends, making it a critical component of the overall tax collection framework in India.

- Assertion Analysis: The assertion is true because TDS allows taxpayers to pay taxes incrementally throughout the year rather than in a lump sum at the end of the financial year, which can ease financial stress.

- Reason Analysis: The reason is also true as it correctly describes the TDS process, where tax is deducted at the source of income generation.

- Explanation Validity: The reason provides a correct explanation of the assertion since the upfront collection of tax through TDS indeed reduces end-of-year tax liabilities.

- The Assertion (A) is true because online verification allows taxpayers to track their TDS deductions, thus enhancing transparency.

- The Reason (R) is false as the online process is generally user-friendly and designed to encourage taxpayers to verify their TDS easily.

- Since the assertion is true and the reason is false, Option C is the correct answer.

The primary purpose of Tax Deducted at Source (TDS) is to ensure that the government collects tax revenue in advance, which helps minimize tax evasion. By deducting tax at the source of income, the government secures a steady stream of revenue, facilitating better financial planning and resource allocation. This system also encourages compliance among taxpayers, as taxes are deducted before the income is received, reducing the likelihood of non-payment.

- The Assertion is true because TDS rates indeed vary based on the type of income, ranging from 1% to 30% as outlined in the Income Tax Act.

- The Reason is false because TDS rates are not fixed; they are variable and depend on specific categories of income.

- Therefore, the Reason does not provide a correct explanation for the Assertion.

- The Assertion (A) is true because TDS helps in the regular collection of taxes, ensuring that taxpayers do not face a large tax liability at the end of the financial year.

- The Reason (R) is false since TDS applies to various forms of income, not just salaries (e.g., interest, rent).

- Therefore, while both statements are true, the reason does not correctly explain the assertion, making Option B the correct choice.

Statement 1 is incorrect because TDS applies to various types of income, not just salary payments. It covers interest, rent, dividends, and other payments as well.
Statement 2 is correct as TDS is indeed introduced by tax authorities to ensure regular tax collection and to minimize tax evasion. Therefore, the correct option is B.

Taxpayers can verify their TDS details through online government portals or authorized platforms. This online access allows individuals to track the TDS that has been deducted from their income and deposited against their Permanent Account Number (PAN). This process simplifies the monitoring of tax deductions and ensures transparency in tax collection. An additional fact is that taxpayers can also download their TDS certificates online, which is essential for filing their income tax returns accurately.

TDS stands for Tax Deducted at Source. This term refers to a system where tax is deducted directly from the income at the point of origin. This ensures that taxes are collected in advance, which helps in managing tax revenue for the government efficiently. An interesting fact to note is that TDS is applicable to various types of payments, including salaries, interest, and professional fees, making it a crucial mechanism in the tax collection process.