Difference Between TDS and Income Tax Return

Many taxpayers are confused between the terms, Tax Deducted at Source (TDS) and Income tax return. As a salaried individual, it is necessary to understand the difference between income tax and TDS to know their effect on tax liability and refund. The main difference between TDS and Income Tax return filing is that TDS refers to the tax deducted from the payer's sources of income based on the expected tax liability. In contrast, the Income tax is deducted from the payer’s overall profit or annual return. This article helps you to get a thorough understanding on TDS vs Income tax, related terms, with the definitions, advantages and the procedure for filing. At IndiaFilings, our team of experts is well-equipped to assist you with TDS and Income Tax return filings. With a focus on accuracy and compliance, we ensure a hassle-free and efficient tax filing experience tailored to your needs. [shortcode_37]

What is TDS?

TDS, or Tax Deducted at Source, is a tax collection mechanism mandated by the government of India. Under TDS, individuals or corporations making specified payments, such as salary, interest, rent, or professional fees, must deduct a certain tax percentage before making the payment. Primarily, the tax is deducted from the payer's very source of income. The deducted tax is then directly remitted to the government, ensuring a regular flow of revenue and distributing the tax collection responsibility among various payers. TDS is crucial in preventing tax evasion and smoothens the tax collection process.

Procedure to File a TDS Online

Below, you can understand the eligibility criteria and the exact procedure to file a TDS online.

Eligibility Criteria to File TDS

Salary Payment
Earnings from Investments
Money from winning contests, riddles, and similar activities.
Winnings from horse races
Commissions from insurance
Payments related to the National Savings Scheme and various other sources.

Step-by-Step Process to File a TDS Online

Go to the income tax e-filing website
Log in using your TAN (Tax deduction or collection number) and password
Click the ‘e-file’ from the dashboard, select the ‘Income tax forms’ and then choose ‘File Income Tax forms’.
Select the form that you have decided to file
Proceed to ‘Upload TDS Form’ and then Click on ‘Let’s Get Started’ Option
Enter the mentioned details properly and click on ‘Proceed to verify’
Validate the return using the OTP sent to your registered mobile number to complete the process

After the completion of the process, you will receive a success message. If you have not already generated the DSC, you can use the Electronic Verification Code to validate the TDS statements.

Advantages of TDS

It prevents people from tax evasion since the tax is collected before income generation.
It promises a steady flow of revenue for the Government. It helps the government meet budgetary requirements and public welfare initiatives.
The Tax collection base is expanded with the implication of TDS.
The lower burden of responsibility for the Tax collection agencies and the Deductor (payer).
It ensures convenience for the Deductee since the tax collection process is automated.

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What is Income Tax?

Income Tax is a tax on the annual income earned by the individual or company during the fiscal year. It is governed by the Income Tax Act of 1961, which outlines the rules and regulations for income tax calculation, assessment, and collection. The taxes apply to diverse income sources, like salaries, income from house property, profits from profession or business, and capital gains. Any Indian citizen who earns above Rs. 2.5 lakhs have to pay the income tax; avoiding that will lead to paying the penalty.

The process to File an Income Tax Online

We provided the information regarding the eligibility criteria and the detailed process to file an Income Tax Return (ITR) online.

Eligibility Criteria to File Income Tax

Any person whose annual income is higher than 2.5 Lakhs
For senior citizens who are more than 60 years old and less than 80 years old, the limit is 3 Lakhs
For senior citizens who aged more than 80 years, the limit is 5 Lakhs

Step-by-Step Process to File Income Tax Online

Go to the official Income tax e-filing website and click the ‘Login’ Button.
Enter the credentials carefully to log in
Click on the ‘e-file’ tab and then click on ‘File Income tax return’
Select the financial year you intend to file your income tax returns and click on ‘continue’
Choose how you intend to file your income tax returns, whether as an individual, Hindu Undivided Family (HUF), or others. Then, choose the ‘income tax returns’ you decided to file.
Ensure to accurately provide your bank account details or pre-validate if you have already submitted.
Now, you will be directed to the new page where you need to file the income tax returns. This page contains the information that you already filled in. Cross-check all the given details for its accuracy. Then, confirm the summary of your returns and validate it.
The last step is to verify your returns and send the hard copy to the Income Tax Department. The verification process is mandatory.

Advantages of Income Tax

It can prevent the penalties and unnecessary consequences.
Income Tax Return (ITR) has an immense legal value since it is recorded with the government.
It acts as an important document when applying for bank loans.
The government uses it to improve various aspects of the country, such as healthcare, education, etc.
It is a price one pays for civilization.

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What are the major differences between TDS and Income Tax?

The following points clearly emphasizes the TDS and income tax difference,

Tax Deducted at Source (TDS) is tax deducted from the very source of income periodically throughout the year. On the other hand, Income tax is paid by the taxpayer at the end of the financial year.
TDS deduct the tax from the source of a specified person making prescribed payments to the deductee, while Income tax is a tax charged on the annual income earned by the person or business in the financial year.
In TDS, the tax is deducted by the payer (employer or financial institution) instead of the payer's intervention. The payer directly pays income tax after calculating tax liability from the earnings in a financial year.
The tax rate of TDS is based on the nature of payment specified by the Indian government. The income tax rate is based on the income slabs outlined under the income tax laws.
TDS applies to different types of payments, such as salary, interest, rent, professional fees, etc. On the other hand, income tax is levied from the total income earned by the person or business entity, which is salary, capital gain, etc.

Below, you can find the major differences involved in TDS vs Income Tax in a simplified format.

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.

Conclusion

We hope you understand the difference between TDS and the Income Tax Return. As already said, it is necessary to understand the distinction between these terms if you are a taxpayer or an Indian citizen. To achieve that goal, we provided the definitions of the terms, advantages, how the filling procedure differs, and all the major TDS and income tax differences you must know. If you want further clarifications regarding the difference between income tax and TDS and wants help for filing, please contact or mail us.