File your ITR Hassle-Free and Maximise your Refunds
Trusted by 1 Million+ Users
4.8 Star User Rating
Authorized by Tax Department
Many taxpayers are confused by the terms “Income Tax” and “Tax Deducted at Source (TDS)” as they appear to be similar. However, these two terms have different meanings and calculations. For salaried individuals who need to file their tax returns, it is important to understand the differences between these terms and how they affect their tax liability and refund. Read further for a thorough comprehension of these terms.
TDS, or tax deducted at source, denotes the process of deducting tax by the payer before making any payment to the recipient. The motive behind this procedure lies in its efficacy in controlling tax evasion. By implementing TDS, the authorities ensure that tax is collected in advance, thereby preempting any potential evasion that might occur if taxpayers were solely responsible for paying taxes during the filing process.
Income taxes are charged on the revenues of both individuals and corporations. These taxes are applicable to various income sources, including dividends, interest, winnings from gaming, sales of goods, wages, and salaries.
The term "individual income taxes" contains the overall concept of income tax returns. Employees and other individuals generating income pay these taxes. Additionally, companies, estates, trusts, and other entities must pay income taxes based on their earnings or total revenue.
Income tax and TDS serve as two distinct methods of tax collection, each operating in a different manner. The following are four differences:
Annual vs. Periodic:
Direct vs. Indirect:
Gross Income vs. Certain Income:
After vs. Before:
If the deducted tax exceeds the actual tax liability, the taxpayer typically becomes eligible for a tax refund from the government. This situation often arises when an individual has had excess tax withheld from their income throughout the year, either due to a miscalculation or changes in their financial circumstances.
In such cases, the taxpayer can file their tax return, indicating the excess amount of tax deducted. Once the tax authorities process the return and verify the information, they will issue a refund for the overpaid amount.
Taxpayers need to keep accurate records of their income, deductions, and tax withholdings to ensure they can claim the appropriate refund if the deducted tax exceeds their actual tax liability.
TDS is deducted by the person making the payment. The responsibility of filing an Income Tax Return rests with the taxpayer, be it an individual, a company, or any other entity generating taxable income.
TDS is calculated based on the specified rate applicable to the type of payment, while an Income Tax Return involves the declaration of total income, deductions claimed, and the tax liability for the assessment year.
Yes, there are different forms for TDS, such as Form 16, 16A, and 16B, depending on the type of income. For Income Tax Returns, the forms vary based on the nature of income and the category of the taxpayer (e.g., ITR 1, ITR 2, ITR 3, etc.).
Yes, TDS can be adjusted against the total tax liability at the time of filing the Income Tax Return. If the TDS deducted is higher than the tax liability, the taxpayer can claim a tax refund. If the TDS deducted is lower than the tax liability, the taxpayer needs to pay the remaining tax.
No, TDS is deducted on the total payment without considering any deductions or exemptions. However, while filing the Income Tax Return, one can claim deductions and exemptions as per the provisions of the Income Tax Act.
Yes, both TDS deductions and Income Tax Returns can be rectified after submission. TDS can be rectified through filing corrections in TDS returns, and Income Tax Returns can be revised within a specified time frame using the online portal.
