In Indian income tax, what is the meaning of TDS (Tax Deducted at Source) and how is it generally charged on payments made to taxpayers?

Introduction / Context:
TDS, or Tax Deducted at Source, is a very common concept in Indian income tax and is frequently asked in accounting and finance interviews. Understanding what TDS means and how it is charged helps candidates explain how tax is collected in advance by the government and how cash flows are affected for both payer and payee.

Given Data / Assumptions:
- The question refers to Indian income tax law in a general interview context.
- TDS is applied on eligible payments such as salary, interest, commission, contract payments, rent and professional fees, subject to limits and rates prescribed by law.
- The focus is on the meaning of TDS and the basic way in which it is charged, not on exact sections or rates.

Concept / Approach:
TDS stands for Tax Deducted at Source. The core idea is that instead of waiting for the recipient of income to pay tax later, a portion of the tax is deducted by the payer at the time of making the payment. The payer then deposits this amount to the government under the recipient's Permanent Account Number. This mechanism improves tax compliance, gives the government earlier access to revenue and creates a trail of high value or regular payments.

Step-by-Step Solution:
Step 1: Identify that TDS is an income tax concept linked to the Income Tax Act in India.
Step 2: Recall that TDS expands to Tax Deducted at Source and is designed to collect tax at the point where income is generated.
Step 3: Understand that the deduction is made by the payer of income. Examples include employers deducting TDS from salary or companies deducting TDS from contractor payments.
Step 4: The deducted amount is deposited with the government and appears in the recipient's Form 26AS or similar tax credit statement.
Step 5: At the time of filing the return, the recipient adjusts total tax liability with TDS already paid on their behalf.

Verification / Alternative check:
Whenever you see TDS mentioned, you should be able to replace it mentally with the phrase Tax Deducted at Source. If a description talks about the payer cutting tax from payments and depositing it to the government before the receiver gets the net amount, that description is aligned with the correct meaning of TDS.

Why Other Options Are Wrong:
Option B is wrong because Total Direct Subsidy is not a standard tax term and does not describe a deduction at payment stage. Option C is wrong because it talks about tax deposited separately by the taxpayer, which is more like self assessment tax or advance tax, not TDS. Option D is wrong because Transferable Deposit Scheme is not a recognised name for TDS and does not capture the core concept of deduction at the source of income.

Common Pitfalls:
Candidates sometimes confuse TDS with advance tax or self assessment tax. In TDS, the obligation to deduct and deposit tax is on the payer, while in advance or self assessment tax the taxpayer pays directly. Another mistake is to think that TDS is an extra tax. In reality it is only a mode of collection and is adjusted against final tax liability, with any excess leading to a refund. Also, some learners think TDS applies only on salary, but it covers many categories of payments subject to limits and conditions.

Final Answer:
Correct option: Tax Deducted at Source, where tax is deducted from eligible payments at prescribed rates and deposited with the government.