Avoidance of double taxation
Since a 'resident' is liable to pay tax in India on his 'total world income', it is possible that he may have to pay tax on his foreign income in that country also, where it is earned. Such situation leads to double taxation of the same income -in India and again in the country where it is earned. To avoid such a situation, the Government of India has entered into agreements for avoidance of double taxation with different countries.
TDS (Tax deducted at source)
Under TDS, tax is deducted at the source of income, by the employer or the payer and paid to the government. It includes salary, interest, commission and contract fees, rent, professional fees, etc. This type of deduction is popularly known as TDS. Such tax is subject to certain limits and certain conditions.
In case of senior citizen, if he/she estimates that the tax on the income is nil, Form No.15H duly filled and signed is to be submitted in duplicate to the bank. So, no TDS will be deducted. If the total income is less than the threshold limit, Form No.15G is to be submitted to the payer to prevent TDS from such interest.
TCS (Tax collected at source)
Unlike tax deducted at source, TCS is collected by a seller of certain specified goods at the specified rates on the purchase of the goods and it is remitted to the treasury on behalf of the buyer. In the same way, a person granting a lease or license in a parking lot, toll-plaza, etc. collects the taxes at the specified rates as tax paid on behalf of the lessee.
Advance Tax is paid by the income earner during the previous year. The computing of the liability of advance tax is done by estimating the 'total income' for the year, calculating the surcharge and taking into consideration the rebate that will be available. The advance tax is required to be paid in three installments.