Both Income Tax and TDS are two different ways of collecting taxes and have different mechanisms when it comes to computing them. The former is the complete tax contribution owed by the individual and the latter is only a partial tax contribution. Hence, it becomes imperative to avoid confusion related to these terms and understand the relevance and implications of these taxes before filing tax returns. In this article, we’ll get to deeply learn about both of these in a very simplified way.
Income tax laws say that returns must be filed every year by persons/businesses that are earning income during an FY. This could be in the form of a stipend, profits from business, income from house property, or earned through dividends, capital gains, interests, or other like sources. Filing an income tax return is an explicit way of declaring one’s Total Income. One can file a voluntary tax return even if their income is below the threshold limit but is mandatory for all those who have income above the basic exemption limit under the Income Tax Act, of 1961.
On the other hand, “Tax Deducted at Source”, commonly termed as TDS was introduced with the aim to have a seamless approach to collecting tax from the point of generation of income and significantly reduce the burden on Tax Collection Agencies to collect tax. Under this regime, tax is deducted at the origin of the income. Any deductor liable to make payment of specified nature to any other person or deductee shall deduct TDS and remit the same into the account of the Central Government. TDS is currently applicable on payments like salaries, rent, professional fees, brokerage, commission, etc.
Process of Filing Income Tax Online
→ Collect required documents such as TDS certificates (Form16/16A), capital gains statements etc
→ Download and check Form 26AS and rectify the errors.
→ Computer total income of the FY, tax liability, and final payable tax.
Step 1: Visit the official Income Tax e-filing website and Click on the 'Login' button.
Step 2: Enter your Credentials to log in
Step 3: Click on the tab 'e-file' and then click on 'File Income Tax Return'.
Step 4: Select the Assessment year for which you wish to file your income tax returns and click on 'Continue'.
Step 5: Choose whether you wish to file your income tax returns as an individual, Hindu Undivided Family (HUF), or others. Then Choose the income tax returns (ITR) you wish to file.
Step 6: Provide details of your bank account, or pre-validate it if already given.
Step 7: You will then be directed to a new page to file your return. The page will contain a lot of information already filled. Crosscheck them to make sure all the details mentioned are correct. Then confirm the summary of your returns and validate it.
Step 8:The final step is to verify your returns and send a hard copy of it to the Income Tax Department. The verification process is mandatory.
In order to get a copy of filed Income Tax Return, follow these steps –
Step 2: Go to the 'My Account' menu
Step 3: Select hyperlink – ‘View e-Filed Returns / Forms.
Step 4 Click on the relevant option from the dropdown
Step 5: Click 'Submit' to view the details of the e-Filed Return/Forms.
Advantages of filing Income Tax
→ Avoids unnecessary penalties and unpleasant consequences.
→ Income Tax Return holds immense legal value. It is recorded with the government.
→ Acts as an Important Document While Applying for Loans
→ Filing the Income-tax return not only helps you but also helps the nation. The tax that people pay is used by the government to build infrastructure and to improve other facilities of the nation such as medical, defense, etc.
Process of Filing TDS Returns Online
→ It is mandatory for corporate and government deductors to furnish their TDS returns in electronic form (e-TDS return) from F.Y. 2004-2005 onwards.
→ e-TDS return has to be prepared in the data format issued by the e-Filing Administrator which is available on the Income Tax Department website and NSDL-TIN website.
→ There is validation software available along with the data structure which should be used to validate the data structure of the e-TDS return prepared.
→ Revised TDS Return filing can only be done if the original return is accepted by the TIN central system.
Step 1: Go to https://incometaxindiaefiling.gov.in/.
Step 2: Log in using your credentials.
Step 3: Once you’ve logged in, click on the “TDS” menu and select “Upload TDS” from the drop-down list.
Step 4: A form will appear where you will need to select the correct details. Click on Validate once the details are selected. The returns can be validated through the following modes:
- Validate using DSC or Digital Signature Certificate. The TDS statements can be uploaded using DSC. To upload using DSC, first, upload the TDS zip file and also attach the digital signature file. Then, click on Upload. Once the TDS statement is uploaded, a success message will appear on the screen and a confirmation mail will be sent to your registered email ID.
- Validate using Electronic Verification Code. After step 4, if you haven’t generated a DSC, you will be able to validate the TDS statements using an electronic verification code (EVC).
Step 5: Upload the TDS zip file and click on ‘Click here to E-verify’.
Step 6: Once you are done with form validation, submit the form. After successful submission, a message will be displayed on the screen and a confirmation mail will be sent to the registered email ID.
The status of the return can be checked by providing the Provisional Receipt Number and the PAN details on the official website of the NSDL.
Advantages of TDS
→ It prevents people from evading taxes.
→ It ensures a steady source of revenue for the Government.
→ The Tax Collection base is widened.
→ The burden of responsibility of the Tax Collection Agencies and the Deductor is lessened.
→ It is convenient for the deductee as Tax is automatically deducted.
Both income tax and TDS have a special significance in Indian Taxation that has a significant bearing on the taxpayers. Although they are both connected to an individual’s income, they are calculated and settled differently. Income tax is a tax on an individual’s total annual earnings or the profit of a business entity. TDS refers to a fraction of the expected tax that will be deducted periodically or, sometimes, from an individual’s earnings. It can be regular or irregular in nature. While it may not be necessary to pay tax at the source, one may need to pay income tax at year’s end.