TDS stands for Tax Deducted at Source, a method where income tax is automatically deducted from an individual's payments during certain transactions, such as salary, rent, interest, professional fees, and commissions. Typically, the recipient is obligated to pay the income tax. However, the TDS mechanism allows the tax to be collected upfront from the payments made, ensuring timely tax collection by the government. The amount received after the TDS deduction is the recipient's net income, and they must then report the gross amount (before the TDS deduction) in their tax return.