WHAT’S THE DIFFERENCE BETWEEN TDS AND INCOME TAX RETURN?
The phrases income tax return filing and Tax Deducted at Source (TDS) are often misunderstood by taxpayers. Knowing the distinctions between TDS and ITR and how they affect tax liability and refunds is essential for salaried individuals.
The tax compliance deducted from the payer’s sources of income based on the anticipated tax burden is referred to as TDS, and this is the primary distinction between submitting an income tax return and TDS.
On the other hand, income tax is subtracted from the payer’s yearly return or total profit.
Our team of professionals at FilingsFirst is qualified to help you file your income tax return and TDS. We provide a hassle-free and effective tax filing experience catered to your needs, with an emphasis on accuracy and compliance.
WHAT IS TDS?
Tax Deducted at Source, or TDS is the amount of income tax that is subtracted from the money that the individuals making certain payments, such as rent, commission, professional fees, salary, interest, etc., pay. Generally, income recipients are required to pay income taxes. However, the government ensures that income tax is withheld in advance from your payments with the use of Tax Deducted at Source rules. The net amount is given to the income recipient (after lowering TDS). The recipient deducts the amount of TDS from his ultimate tax due and adds the gross amount to his income. For the money that has already been withheld and paid on his behalf, the recipient accepts credit.
WHAT IS INCOME TAX RETURN?
An individual files an Income Tax Return (ITR) with the Income Tax Department of India in order to provide details about their income and any taxes they owe for that particular year. Information submitted in an ITR must be relevant for a certain fiscal year that runs from April 1 through March 31 of the following year.
Components of TDS and ITR
Income Tax Return (ITR)
- Individuals earning more than 2.5 lakhs (old tax regime) or ₹3 lakhs (new tax regime) are required to file an income tax return (ITR).
- For older adults who are more than 60 years old and less than 80 years old, the maximum is 3 lakh.
- For older citizens aged more over 80 years, the ceiling is 5 lakhs.
Tax Deducted at the Source (TDS)
- Salary Payment
Income from investments and rent - Money earned from winning contests, lotteries, gambling, prize money, riddles, and other similar activities.
- Commissions from insurance.
- Payment for contractors, brokers, commissions, and other professional fees
- Payments related to the National Savings Scheme and several additional sources.
Major Differences between TDS and ITR
| Tax Deducted at Source (TDS) | Income Tax |
|---|---|
| Tax is deducted periodically throughout the year at the income source. | Taxpayers will pay the tax at the end of the financial year. |
| Deducted by the payer (employer or financial institution) | Paid directly by the taxpayer after calculating the tax liability. |
| No payer’s intervention in tax deduction. | The payer directly calculates and pays tax after the financial year. |
| The tax rate is based on the nature of payment specified by the Indian government. | The tax rate is based on income slabs outlined in the income tax laws. |
| Applicable to payments like salary, interest, rent, professional fees, etc. | Levied on the total income, including salary, capital gains, etc |
We trust that you now recognise the distinction between the income tax return and TDS. The contrast between these phrases must be understood, as previously said if you are an Indian citizen or a taxpayer.
In order to accomplish that, we’ve included definitions for key terminology, benefits, an explanation of the variations in the filling process, and all the important details you need to be aware of. If you would like further information, please email or call us at Filingfist.