Are you confused about Income Tax and TDS, know the difference and usage between the two

ITR vs TDS: Income tax return filing has started. First time tax payers and youth are confused about the meaning of ITR and TDS. There is a huge difference between these two. Income tax is a tax levied on the annual earnings of a company, while TDS is useful to prevent tax evasion. Let us know the difference between the two…

What is income tax?

The tax levied on the total annual earnings recorded by a company or individual during a financial year is called income tax. Which includes all sources of income such as salary, income from house property, profits from business or profession and capital gains. According to the budget released by the Central Government, in the old tax system Rs. 2.5 lakh and in the new tax regime Rs. There is no tax on income up to Rs 3 lakh. After this, tax has to be paid on the increased income.

What is TDS?

Tax Deducted at Source (TDS) is tax deducted in advance from the source of income and sent directly to the government. Under TDS, individuals or organizations making certain payments like salary, interest, rent or business fees have to pay a certain percentage of tax before making the payment. Which is important to prevent tax evasion and facilitate the tax collection process.

Difference between Income Tax and TDS

, TDS is a continuous deduction from income during the year, while income tax is payable at the end of the year.

, TDS is deducted by financial institutions or employers before salary or payment is made, whereas income tax is paid by the taxpayers after determining the tax liability.

, The TDS tax rate is decided by the government, which is paid directly to the government treasury. Whereas income tax is levied as per the income tax slab prepared under the law.

, TDS is applicable on payments including salary, interest, rent, professional fees. Whereas income tax is levied on total annual income.

Can claim for TDS refund

If TDS is deducted from your salary, you can claim TDS refund while filing income tax return at the end of the financial year. In most cases, refund is possible on TDS deducted from salary. Under Section 80C of the Income Tax Act, the maximum amount is Rs. Can apply for TDS refund up to Rs 1.50 lakh. If TDS deducted is more than tax liability, you can get TDS refund.