Income tax and tax withheld at source (TDS) are the two most common terms that taxpayers often come across. They may look similar, but there is a lot of difference between income tax and TDS. The two taxes have a different mechanism when it comes to calculating them.

Therefore, before filing tax returns, it becomes necessary for salaried individuals to avoid any confusion related to these terms and to understand the relevance and implications of these taxes.

Income tax

Income tax refers to a mandatory contribution levied on an individual’s income based on his earnings. There are standard tax rates for money deducted from your gross income. In other words, it refers to the total tax payable on an individual basis, his annual taxable income after taking into account the deductions and exemptions determined at the end of a financial year.

TD

On the other hand, the TDS represents part of the income tax already paid by the assessee, which can be set off against the income tax and the balance of the tax payable.

It is a process by which the government can collect taxes quickly and efficiently. TDS, as the name suggests, is a part of your income tax which is deducted by the employer or other deductors when paying to the employee and the same is deposited by them with the tax department. ‘income tax.

Differences Between Income Tax and TDS

Income tax and TDS are two forms of collecting taxes in different ways.

Income tax is paid on annual income, where taxes are calculated for a particular financial year.

The TDS is deducted at source periodically during a given year.

Income tax is paid directly to the government. At the same time, TDS is an indirect means of discharging tax debt where the tax deductor facilitates the tax recovery process for the government.

Income tax is levied on the aggregate income earned by an (insured) individual during a financial year.

Under the TDS, the Income Tax Act imposes an obligation to withhold tax at source only on certain persons making prescribed payments.

Income tax is levied on all salaried persons or entities for the income they have earned in excess of the prescribed tax limit for that particular period after the end of a certain financial year.

In TDS, the whole process of tax deduction and payment results in an obligation to pay taxes even before the taxpayer receives the income.