Revenue tax and Tax Deducted at Supply (TDS) are the 2 commonest phrases that taxpayers typically come throughout. They might sound comparable, however there’s a variety of distinction between Revenue Tax and TDS. Each the taxes have a special mechanism in the case of computation.
Due to this fact, earlier than submitting tax returns, it turns into important for salaried people to keep away from confusion associated to those phrases and perceive the relevance and implications of those taxes.
Revenue tax refers to a obligatory contribution levied on the revenue of a person in keeping with their earnings. There are commonplace tax slab charges for the quantity deducted out of your gross revenue. In different phrases, it refers back to the whole tax legal responsibility on a person foundation, his annual taxable revenue after contemplating the prescribed deductions and exemptions on the finish of the monetary yr.
Alternatively, TDS represents the portion of revenue tax already paid by the assessee, which will be set off in opposition to the remaining tax legal responsibility of revenue tax and to be paid.
It’s a course of by way of which the federal government can accumulate taxes shortly and effectively. TDS, because the identify suggests, is part of your revenue tax that’s deducted by the employer or different deductors on the time of cost to the worker and deposited by them with the Revenue Tax Division.
Distinction Between Revenue Tax and TDS
Revenue Tax and TDS are two types of gathering tax in several methods.
Revenue tax is paid on annual revenue, the place taxes are calculated for a selected monetary yr.
TDS is deducted at supply now and again in a selected yr.
Revenue tax is paid on to the federal government. Additionally, TDS is an oblique approach of discharging one’s tax legal responsibility the place the deductor of taxes facilitates the method of tax assortment for the federal government.
Revenue tax is levied on the full revenue earned by an individual (assessee) throughout a monetary yr.
Below TDS, the Revenue Tax Legislation imposes an obligation to deduct tax at supply solely on sure individuals making the prescribed cost.
Revenue tax is levied on all salaried people or entities after the completion of a sure monetary yr for revenue earned above the prescribed tax restrict for that exact interval.
In TDS, the whole technique of tax deduction and cost leads to an obligation to pay taxes even earlier than the revenue is acquired by the taxpayer.