TDS and Income Tax – Two Different Entities

TDS (Tax Deduction at Source) could be part of Income in turn income tax that is already paid by the assessee whether an assessee is eligible for the income tax or not whereas an income tax is a tax that government imposes on financial income generated by any individual or firm which is a key source of capital that the government uses to fund its activities and serve the public.

There is some difference in computation part, i.e. TDS is deducted before the income reaches to any individual or entity which then after can be calculated and if over taxed then it can be refunded.

The Central Board of Direct Taxes (CBDT) regulates the policy and planning of taxes. CBDT is also responsible for administering the direct tax laws through the IT (Income Tax) Department. In addition to the collection of taxes, the IT department is also involved in prevention and detection of tax avoidance.

What is Income Tax?

The Income Tax Act, 1961 regulates the collection, recovery, and administration of income tax in India. It is a compulsory contribution levied on individual’s personal income as per his/her earning which is divided into different slab percentage according to which the money gets deducted after all the exemptions from your gross income.

Income Tax is paid on the annual income where taxes are computed for a particular financial year.

What is Tax Deducted at Source (TDS)?

TDS is a part of income in turn Income-tax that is already paid by the deductee whether a deductee is eligible for the income tax or not which can be set off against Income tax and balance tax liability to be paid. Necessary adjustments of TDS are done while filing Income Tax return and in case any excess amount is deducted or over taxed then that can be claimed to refund.

TDS aims to collect tax from the very source of income. A person (deductor) who is liable to make payment of specified nature to any other person (deductee) shall deduct tax at source and remit the same into the account of the Central Government. The deductee from whose income tax has been deducted at source would be entitled to get credit of the amount which deducted on the basis of Form 26AS or TDS certificate issued by the deductor.

TDS can be deducted from Income from salary, income from any commission, professional fee, interest from FD and many other income sources etc. so tax deduction at the point of generation of income is known as Tax Deducted at Source or TDS and the same is deposited to the Income Tax department of the concerned area. It is deducted at source on a periodic basis say quarterly in the particular year for the salaried individuals and for others it is deducted on each set of incomes and then can be claimed.