Difference Between Income Tax and TDS: Income Tax and TDS are two important factors of the taxation system which play an important role in revenue collection and compliance.
Income Tax VS TDS: Do you know what is the difference between Income Tax Return and TDS (Tax Deducted at Source)? Many people are confused about this. So today we will tell you about both of them. Actually Income Tax and TDS are two important factors of the taxation system which play an important role in revenue collection and compliance. But both work under different systems.
To understand the tax system better, it is important to understand the difference between income tax and TDS. Here we are going to tell you in detail about the difference between these two.
Income Tax: Personal Taxation
Income Tax is a very common term in personal finance, and it is a direct tax that the government levies on a person’s income. This tax is levied on various sources of income, including salary, business profit, capital gains and other means of earning. The responsibility of calculating his income (Income Tax Calculator) and paying tax accordingly lies entirely with the taxpayer, who has to follow the tax slabs and rules made by the government.
TDS: Tax Deduction at Source
In contrast, Tax Deducted at Source (TDS) is a method by which the government collects tax directly from the income source. It is a form of withholding tax in which a fixed amount is deducted as tax before any salary, interest, rent or consultancy fees is paid to an individual or organization and is immediately remitted to the government. TDS simplifies the process of collecting tax for the government and also helps prevent tax evasion.
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Who has to file income tax return?
Filing Income Tax Return (ITR) is mandatory for those individuals whose annual income is more than Rs 2.5 lakh under the old tax regime or Rs 3 lakh under the new tax regime. For senior citizens aged 60 to 80 years, this limit is Rs 3 lakh, while for those aged 80 years and above, this limit is Rs 5 lakh.
When is TDS deducted on income?
On the other hand, TDS is a process in which a part of your income is deducted at the source. This includes income from salary (TDS on Salary), income from investments and rent, income from winning contests, lottery, gambling, prize money, and many other similar incomes. TDS is applicable on commissions received from insurance, payments made to contractors, brokerage, commissions and fees for professional services. Apart from this, TDS is also levied on payments made from National Savings Scheme and many other types of income sources.
Understanding these limits and the sources of income on which TDS is applicable while filing Income Tax Returns is important to comply with tax rules and avoid penalties.
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