What is Income Tax and TDS i.e. Tax Deducted at Source, because if you have any income from any source, or you are in a job, then you must have often heard these two terms. Both of these are direct taxes, but there is a slight difference between them.
The time for filing income tax returns is going on. The tax filing portal of the Income Tax Department is open from April 1. However, salaried employees are waiting for their Form-16, after which most of the tax filing will happen. But before that, let us talk about what is Income Tax and TDS i.e. Tax Deducted at Source, because if you have any income from any source, or you are in a job, then you must have often heard these two terms. Both of these are direct taxes, but there is a slight difference between them and if you understand it, then along with tax planning, financial planning also becomes easier for you.
What is Income Tax?
Income tax is a tax imposed on the annual income of any person or company. That means, whatever tax you have to pay to the government on whatever income you have earned in a year, that is income tax. Income Tax Act, 1961 is applicable in the country for its rules. You have to file Income Tax Return (ITR Filing) at the end of the financial year. Income Tax: You have to pay income tax on salary, income from house property, profit from business or profession and capital gains. There are two tax regimes in the country – Old and New, in which income up to Rs 2.5 lakh and Rs 3 lakh respectively is tax free. The government imposes penalty for not filing ITR despite having taxable income.
What is TDS?
TDS i.e. Tax Deducted at Source is deducted from the income source of any paying entity. That is, if a company pays salary to an employee, then it deducts TDS on it before payment and deposits it directly with the government. TDS can be deducted on salary, rent, or any other fees. TDS is deducted on salary payments, investment and rent income, money received from competitions, lotteries, gambling, prize money etc., commission on insurance, contractors, brokerage or other similar professional fees, National Savings Scheme and other sources. Is.
What is the difference between Income Tax and TDS?
So as we mentioned above, income tax is deducted once a year on your annual income, it is paid by the taxpayer at the end of the year. TDS is deducted throughout the year on income from different sources. While income tax is paid by the taxpayer himself through ITR after calculating his tax liability, TDS is deducted by the payer i.e. the paying company or institution and deposited directly with the government.
Apart from this, there are some major differences, such as, while TDS is deducted at the tax rate applicable as per the payment, income tax is deducted on the tax slab in which the taxable income of the taxpayer falls.
