Simply put, TDS (Tax Deducted at Source) is the amount deducted by an employer from an employee's salary, before handing him the paycheque. TDS is a part of income tax. It is levied by the Central government. Jemce, the same tax slabs are applicable on all states of India. It is calculated on the gross salary of an employee, after deducting allowances. Since it is collected before handing over the salary to an employee, it is called tax deducted at “source”.