Understanding the Contrast: Income Tax vs Tax Deducted at Source (TDS)

Understanding the Contrast: Income Tax vs Tax Deducted at Source (TDS)

Distinguishing Income Tax:

Income tax and Tax Deducted at Source (TDS) represent distinct facets of taxation, each with its own operational framework.

Income tax constitutes a levy imposed on an individual’s or company’s yearly earnings within a specific financial period. Governed by the Income-Tax Act (ITA) of 1961, it delineates the procedures for tax computation, evaluation, and collection.

This tax is applicable to various income streams such as salaries, rental income, professional profits, and capital gains. Individuals surpassing the threshold of Rs 2.5 lakh under the old tax system or Rs 3 lakh under the new regime are liable to pay income tax. Attempting to evade income tax constitutes a punishable offense under the law.

Decoding TDS:

On the other hand, Tax Deducted at Source (TDS) pertains to tax deductions made from the source of income and promptly remitted to the government. In TDS, entities disbursing specified payments like salaries, interest, rents, or professional fees are mandated to withhold a designated tax percentage before disbursing the amount. This measure aids in curbing tax evasion and streamlines the tax collection process.

Comparison: Income Tax Return (ITR) vs TDS:

Income Tax Return (ITR):

 

Tax Deducted at Source (TDS):

Key Differences between Income Tax and TDS:

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