New Delhi: As income tax season approaches, we need to understand the concept of taxation. Among the essential aspects of personal taxation are Tax Deducted at Source (TDS) and Income Tax Return (ITR). These are crucial components impacting individuals’ financial obligations to the government.
Learning about these concepts can help taxpayers understand what they need to do and make sure they follow the rules correctly.
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Income Tax
Income Tax is a direct tax levied by the government on individuals’ income from diverse sources such as salaries, business profits, capital gains, and other revenue streams.
Taxpayers are responsible for computing and paying income tax according to prevailing tax slabs and regulations established by the government.
Tax Deducted at Source (TDS)
Tax Deducted at Source (TDS) operates as a withholding tax mechanism where a portion of the payment is deducted by the payer and remitted to the government on behalf of the payee.
It applies to various transactions including salaries, interest, rent, and consultancy fees, ensuring a continuous flow of revenue for the government and reducing tax evasion opportunities.
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ITR vs TDS
Filing an Income Tax Return (ITR) is mandatory for individuals whose annual income exceeds a specific level. Under the old tax regime, individuals with income surpassing Rs 2.5 Lakhs are required to file an ITR, while under the new regime, the threshold is Rs 3 Lakhs.
Senior citizens aged between 60 and 80 years have a limit of Rs 3 Lakhs, whereas those aged 80 and above have a limit of Rs 5 Lakhs.
Application Of TDS
TDS is applicable in various scenarios where income is earned, including salary payments, investment earnings, rent, and winnings from contests, lotteries, gambling, and similar activities.
Additionally, TDS is imposed on commissions, payments to contractors, brokerage, professional service fees, and income from the National Savings Scheme and other sources.
