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Income Tax Return & TDS
Income Tax
Annual charge levied on both earned income (wages, salaries, commission) and unearned income (dividends, interest, rents). In addition to financing a government's operations, progressive income taxation is designed to distribute wealth more evenly in a population, and to serve as automatic fiscal stabilizer to cushion the effects of economic cycles.
Its two basic types are (1) Personal income tax, levied on incomes of individuals, households,partnerships, and sole-proprietorships and (2)Corporation income tax, levied on profits (net earnings) of incorporated firms. However, presence of tax loopholes (whose number increases in direct proportion to the complexity of tax code) may allow some wealthy persons to escape higher taxes without violating the letter of the tax laws.
TDS
TDS is simply Tax Deducted at Source. As per the Income Tax Act – persons responsible for making payments are required to deduct tax at source at prescribed rates. Instead of receiving tax on your income from you at a later date, the govt wants the payers to deduct tax before hand and deposit it with the govt.
TDS is deducted on salaries, interest payment by banks, payment of commission, while paying rent, payments made to consultants, payments to lawyers or freelancers. (Some of these requirements to deduct tax are not applicable to individuals – for e.g. individuals are not expected to deduct TDS while paying rent or while paying fees to doctors or lawyers).
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