As per the Income-tax Act, when certain payments such as interest, commission, brokerage, rent are made, the person making the payment is required to deduct tax at source (TDS) and remit the same with the Government.
Hence, the person receiving the payment, known as deductee, receives the payment net of tax. i.e., The total amount receivable less TDS amount.
Claiming of TDS Credit:
Credit of TDS shall be given to the person to whom payment has been made or credit has been given (hereinafter referred to as deductee) on the basis of information relating to deduction of tax furnished by the deductor to the income-tax authority or the person authorised by such authority.
Therefore, the TDS Credit can be claimed by the deductee.
The TDS amount can also be claimed in the hands of the other person as per rule 37BA(2), where it states that the “income on which tax has been deducted at source is assessable in the hands of the person other than the deductee, credit for the whole or any part of the TDS, shall be given to the other person and not the deductee.”
It means the other person can claim TDS in his/her hands even if the TDS is not deducted and deposited against his/her PAN.
However, the deductee should file a declaration with the deductor and the deductor should report the tax deduction in the name of the other person in the information relating to the deduction of tax to the income tax authority or the person authorized by such authority.