Income Tax News: The two phrases that taxpayers encounter most frequently are income tax and tax deducted at source (TDS). Although they may have similar sounds, income tax and TDS differ greatly from one another. The two types of taxes are computed using distinct mechanisms. Therefore, it becomes essential for salaried individuals to comprehend the significance and ramifications of these taxes and to avoid confusion surrounding these phrases prior to completing tax returns.
What is Income Tax?
Income tax is a mandatory tax that is assessed on an individual’s income based on their wages. The amount that is subtracted from your gross income is subject to ordinary tax slab rates. Put differently, it pertains to an individual’s overall tax obligation, which is their taxable income for the year after all deductions and exemptions are taken into account at the conclusion of the fiscal year.People should comprehend the significance and ramifications of these taxes and avoid misconceptions over these phrases.
What is TDS?
TDS, on the other hand, is a portion of the assessee’s already-paid income tax that can be deducted from income tax to reduce the amount of unpaid taxes. It’s a method the government uses to efficiently and swiftly collect taxes. As the name implies, TDS is a portion of your income tax that is withheld by your employer or other deductors when they pay you, and they deposit this with the income tax department.
Difference Between Income Tax and TDS
TDS and income tax are two distinct methods of tax collection. When taxes are computed for a specific financial year, income tax is paid on the annual income. Throughout a given year, TDS is periodically withheld at the source. Direct payment of income tax is made to the government. TDS, on the other hand, is an indirect method of paying one’s taxes due, with the tax deductor helping the government with tax recovery.
Income tax is imposed on the total amount of money that a person (assessee) makes in a given fiscal year. The income tax legislation imposes a requirement to deduct tax at source under TDS only on specific individuals who fulfil specified payment obligations.
After a certain financial year ends, income tax is imposed on all salaried persons or businesses for the income they made above the specified tax ceiling for that specific period. Even before the taxpayer earns revenue, they are still required to pay taxes as a result of the full tax deduction and payment procedure in TDS.
