What is the difference between TDS and income tax?

Abhishek Soni

Abhishek Soni, CA, Co Founder- tax2win.in

Mise à jour il y a 41w · L'auteur dispose de réponses 57 et de vues de réponses 239.5k

Let’s meet Mr. Chill who did nothing for 363 days this year. He spent 1 day in buying a lottery ticket which has a winning amount of INR 1,00,00,000 and another day in winning it, and this fortunate guy won it on 31st March. {tax liability on this- Rs. 30,00,000}.

On 1st April, he bought another lottery ticket and very next day he left India for a world tour and then decided to settle down in Dubai.

Now let’s understand this with both the scenarios-

i) If there are no TDS provisions

ii) If TDS provisions are applicable

i) NO TDS PROVISIONS

Mr. Chill has to pay 30Lacs to tax department as TAX ON HIS INCOME of Rs. 1 Cr. after year end i.e. at the time of filing his income tax return. Since he had already left India with an intention of never coming back, there is no way income tax department can recover it and tax department can not run after him searching in which country he is. (Since there will be thousands of Mr. Chill in the country)

ii) TDS PROVISIONS ARE APPLICABLE

Mr. Taxman an old friend of Mr. Chill; sensed something might go wrong so he authorized and directed Lottery company to pay only INR 70,00,000 (Net of tax) to Mr. Chill et remaining 30,00,000 (Tax on 1 Cr.) to deposit with Income tax department’s bank account.

Furious by this act of Mr. Taxman, Mr. chill called him and:-

Mr. Chill: How the hell you can keep my 30,00,000 with you?

Mr. taxman: Dude it is Tax amount which you are supposed to pay on your lottery income, we have taken it now.

Mr. Chill: But I pay my tax after year end, along with my ITR.

Mr. Taxman: Not a problem, do not pay any tax then since we have already taken it now{TDS}, Just file your tax return ��

Raccrocher

PS:- Income tax is always deposited by yourself however TDS is deposited by other person on your behalf. {in our case tax of Rs. 30,00,000 was a liability of Mr. Chill but Lottery company deposited it on his behalf. This is as good as deposited by Mr. Chill}

Nous

Never get confused between these two terms, these are not two different taxes. Income tax is the sum or amount which you will pay to the government at year end when you files your income tax return but when the government takes it from you during the year {in some cases } we call it TDS.

In technical terms, it is a certain portion of the tax which has been collected by the government at the time of accrual itself.

Learn more about income taxes in this details comprehensive guide here.

MADHVENDRA

MADHVENDRA, Trader & Investor, Vivre Dépression & OCD depuis 2012

Répondu il y a 49w · L'auteur dispose de réponses 486 et de vues de réponses 430.9k

Réponse d'origine: What is the main difference between TDS and income tax?

  1. Impôt sur le revenu is levied on all individus or corporates sur le income earned during the previous year payable in assessment year whereas TDS is tax deducted at source,deducted at the source of income,merely assuming that you have taxable income.
  2. Impôt sur le revenu 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 impôt sur le revenu sur son total annual income, where as TDS is only his partial contribution to his total annual income.
  4. En cas de TDS, la tax is deducted by the payer and is remitted to the Government by the payer on behalf of the payee whereas Impôt sur le revenu devrait être 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 son déclarations d'impôt alors que TDS is déduit in cases such as from salary income, fixed deposits, etc.
  6. 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 and paid in assessment year to the government.
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Swapnil Kabra

Swapnil Kabra, Chartered Accountant, teaching Income Tax since 4 years.

Répondu il y a 130w · L'auteur dispose de réponses 353 et de vues de réponses 5m

TDS is Tax deducted at source. It is a part of Income tax which is already deducted at the source of income.

Let me explain you the logic behind this.

Illustration 1:

Chris Gayle comes to India every year. He plays for Royal Challengers Bangalore. He earns a huge amount of money. Our government now expects him to pay income tax too on his income.

Now it would be really difficult for the government to expect him to come back to India and again pay the tax.

So what do the government do? They simply ask the person paying the income to Chris Gayle (BCCI, in this case) to deduct the amount of tax before paying the income to him. In other words, the amount received by Chris is net of income tax and the tax deducted is TDS.

Illustration 2:

Tata Consultancy services (employer) has thousands of employees working for it. They all are earning their income from salaries. They all will have to pay the income tax (if any) to the government.

Now can you imagine, thousands of employees filing their income tax returns and paying tax separately to the government. Won't it be amazing from the government's point of view if the taxes of all the employees are already deducted at the time of paying them the salary? Hence, for the sake of convenience to government TDS will have to be deducted at the time of salary payment as well by the employer (TCS, in this case)

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Now coming to the income tax part. Income tax is a tax on income earned. TDS is hence very much a part of Income Tax. The only relief to a person paying income tax is that the TDS already deducted will be adjusted against the net income tax payable.

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Par exemple:

If Mr. 'A' is liable to pay income tax of Rs.1,00,000 and the TDS already deducted comes to Rs.20,000 then, he is now liable to pay just Rs.80,000.

Winiin Taxscope

Winiin Taxscope, Income Tax Filing

Répondu il y a 68w

I would like to start by saying that “There is No difference between TDS and Income tax”. TDS stands for Tax Deducted at Source and as the name suggests, it's a part of your income tax which is deducted by your employer or other deductors at the source and deposited by them with the department.

Suppose, your total tax liability stands at Rs 150,000 and TDS of Rs 50,000 has been deducted by your employer from your income, then at the time of filing returns all you have to pay to the Government is Rs. (150,000 – 50,000) which is Rs. 100,000/-.

‘Why should I Pay TDS?’

A valid question.

Now, think of it in this way, what would be better, paying your entire tax in one installment or paying it in parts? In parts, right? You won’t even have to pay TDS by yourself, instead, the deductor is required to pay the amount they deduct from your salary as TDS. Also, TDS collected by the department of income tax, provides a steady source of revenue to the government and thus enables the government to continue with all the development work throughout the year.

With respect to TDS, Form 16 which is handed by your employer to you in the months of April/May is very important. Part A of the form list down all of the TDS deductions made by your employer and other important details like challan number of the deposits made to the government account etc. Part A, thus serves as proof of the tax that you have already paid to the government.

Part B contains other important details about your salary including component breakdown, TDS already paid and tax due, etc. thus, serving the role of a base document for your income tax filing process.

Know more about Form 16 from expert Chartered Accountants, ici

Want to know more about TDS? click ici

Abhinav Aggrawal

Abhinav Aggrawal

Répondu il y a 65w · L'auteur dispose de réponses 52 et de vues de réponses 63.6k

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.

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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.

Conclusion: 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.

Gauri Sankar

Gauri Sankar, Retd.banker, formateur, écrivain, consultant en finance - www.gaurisankars.blogspot.in

Répondu il y a 87w · L'auteur dispose de réponses 2.9k et de vues de réponses 9m

Income tax is tax levied on income earned by an individual/corporate/firm. It can be

  • income through salary
  • interest income from deposits
  • profit from business
  • revenus locatifs
  • income from dividend on shares
  • maturity proceeds of insurance policy/national savings certificate etc.,

TDS is tax deducted at source. It need not be exact and it is at source by the following and directly credited into the income tax account of the beneficiary without his involvement.

  • employer deducting TDS from the salary payable to the employee
  • bank deducting TDS from the interest payable to the depositor
  • organisation deducting TDS from the income payable to the professionals and others for the services rendered by them.

At the time of payment of income tax, the individual/corporate should calculate the actual tax payable by him/them and pay the balance amount only after reducing TDS already credited into income tax account

As such TDS is advance tax deducted and remitted by a third party

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