TDS is a common practice in all the countries of the world. With such an expense, individuals can enjoy a tax deduction right when they get their income. With this, their taxable income falls a great extent.
According to the Indian Tax System any income or salary under any heads of income is eligible for this. The amount is generally collected by state or local governments or any cooperative or a body of trustees and includes any income earned during the previous year from any number of employers. TDS however, does not include, loss incurred from house property income.
The Indian Income Tax Act (IT Act) had provided for certain tax deductions under Chapter IVA for the years 2004-05 and 05-06 and they are as follows:
TDS covers receipt of payment under interest earned from securities and other windfall gains such as horse-racing and winning lottery prizes.Payment to contractors in pursuance of work of any contract including labour contract also comes under the purview of TDS according to the Indian Tax System.
Insurance commission related to procuring all insurance business, fees for professional and technical services, Income in respect of Units of Mutual Fund specified under sec 196A of the Income Tax Act, income from units purchased in foreign currency or long term capital gains arising from transfer of such assets under sec 196B is also covered under TDS.
The USA tax system provides similar process like the Indian Tax system. While they also offer tax deductions on charitable contributions to legal welfare organizations, they offer this on mortgage payments on one’s primary residence, tax exemptions to people with disabilities, tax deductions on business start-up and operation costs. USA offers tax deductions on moving expenses such as casualty expenses not covered by casualty insurance and job-search expenses.