New Delhi. The Indian tax system is filled with complex and difficult terms that can be challenging for common people to understand. Two of the most prominent terms are Income Tax and TDS (Tax Deducted at Source). People often get confused about these two and find it difficult to understand the real difference between them. If you also file income tax or are associated with the tax system, it is important to know the difference between Income Tax and TDS.

What is Income Tax?

Income tax is a type of direct tax levied by the government on the earnings (income) of an individual or organization. It applies to various sources of a person's income, such as salary, business income, interest, rent, capital gains, etc. Income tax rates are based on tax slabs determined by the Indian government, and it depends on each individual's annual earnings.

Meaning of Terms Used in Income Tax

Self Assessment: The taxpayer (i.e., individual or entity) has to calculate their annual income and pay tax to the government accordingly.
Direct Tax: It is collected directly from the taxpayer by the government.
Tax Slab: Different income brackets have different tax rates, which are called tax slabs.
Time Limit: Tax returns are filed at the end of the financial year, providing information about your earnings and taxes paid.
Income Source: It is levied on various sources of income like salary, business, investment, property rent, etc.

What is TDS?

TDS (Tax Deducted at Source) is a method through which the government deducts tax on a person's income before the income reaches the individual. This tax is deducted when you receive salary, interest, rent, commission, or any other type of income. This tax is directly deposited with the government, and the individual has to assess the remaining tax according to their income.