Income Tax and Tax Deducted At Source (TDS) are often confused terms among new taxpayers while filing their tax returns. Before filing their returns one should be aware of certain terms to avoid any confusion or any error.
Here is simple difference between Income Tax and TDS:
1) Income tax is levied on all individuals or corporates for the income earned above the tax limit for that particular period.
TDS is tax deducted at source. Where the tax is deducted at the source of income, merely assuming that you have taxable income.
2) Income tax is paid on the annual income, where as TDS is deducted at source on a periodic basis in the particular year.
3) A taxpayer will have to pay income tax on his total annual income, where TDS is only his partial contribution to his total annual income.
4) In case of TDS, the tax is deducted by the payer and is remitted to the Government by the payer on behalf of the payee. Income tax should be paid by the taxpayer.
5) If a taxpayer's income is below the taxable limit and TDS is deducted then he can claim for the same in his tax returns. TDS is deducted in cases such as from salary income, fixed deposits, etc.
During the end of the financial year, your total tax liability is calculated, the amount of TDS deducted will be subtracted from your total tax liability.
If the net taxable income is less than the taxable limit of Rs 2,50,000 for an individual, Rs 3,00,000 for Senior Citizens, TDS is not applicable.
When filing your returns make sure you have considered all the TDS deducted and claim for the same if you are eligible for the refund.
If you have not received your tax credit statement from your employer or bank one can file their returns by checking form 26AS which will give you exact credit information.