Is TDS and Income Tax the Same for an Employee? Understand Now!
Confused between TDS and income tax? Learn how they differ, how TDS is deducted on salary, and when to claim a refund. Get expert insights and use TDS on Salary Calculator to estimate your tax liability easily!
In this article, we will break down the concept of TDS vs Income Tax, how they work, and why they matter for salaried employees.
What is TDS (Tax Deducted at Source)?
TDS is a tax collection mechanism where the employer deducts a certain percentage of tax from an employee’s salary before paying them and deposits it with the government.
Key Features of TDS:
Deducted at the source of income (by the employer before paying salary).
Acts as an advance payment towards total income tax liability.
The employer is responsible for depositing TDS with the Income Tax Department.
Employees receive Form 16, which shows how much TDS was deducted during the financial year.
What is Income Tax?
Income tax is the total tax an employee is liable to pay on their annual taxable income after considering deductions and exemptions.
Key Features of Income Tax:
Calculated at the end of the financial year based on total earnings.
Includes all income sources (salary, rental income, investments, etc.).
Employees must file Income Tax Returns (ITR) to adjust TDS and determine final tax liability.
If TDS deducted is more than actual tax liability, the employee gets a refund.
If TDS deducted is less, the employee must pay the balance tax when filing ITR.
Difference Between TDS and Income Tax
| Feature | TDS (Tax Deducted at Source) | Income Tax |
|---|---|---|
| Who Deducts It? | Employer (before paying salary) | Paid by the employee at the end of the year |
| When is it Paid? | Monthly (with salary) | Annually (at the time of ITR filing) |
| Purpose | Advance tax collection | Final tax calculation |
| Adjustable? | Yes, adjusted against final tax liability | No, it’s the total tax owed |
| Refunds? | Excess TDS can be claimed as a refund | Applicable if extra tax was paid |
How TDS is Calculated for Employees
TDS on salary is calculated based on income tax slabs for the financial year. Here’s how it works:
Determine Gross Salary (Basic Pay + HRA + Allowances, etc.).
Subtract Deductions & Exemptions (HRA, 80C, 80D, Standard Deduction, etc.).
Apply the Income Tax Slabs (as per New or Old Tax Regime).
Divide by 12 to calculate monthly TDS deduction.
Employer deducts TDS and deposits it with the government.
Example:
If an employee earns ₹12,00,000 per year and claims deductions of ₹2,00,000, the taxable income is ₹10,00,000. Based on tax slabs, the employer deducts TDS monthly.
What Happens if TDS is Not Deducted Correctly?
If the employer fails to deduct or deposit TDS, the employee may face:
Higher tax liability at year-end.
Penalties for underpayment of taxes.
Difficulty in claiming refunds due to incorrect tax records.
Employees should always verify Form 16 and Form 26AS to ensure the correct TDS deduction.
 |
| Is TDS and Income Tax the Same |
How to Claim TDS Refund?
If excess TDS has been deducted, employees can claim a refund by filing an Income Tax Return (ITR):
Login to the Income Tax e-Filing Portal.
Verify Form 26AS (to check TDS deposited).
File ITR by declaring total income and deductions.
Check refund status on the portal.
Conclusion
While TDS and income tax are related, they are not the same. TDS is deducted in advance by the employer, whereas income tax is the final liability calculated at year-end. Understanding this difference helps employees plan taxes better and avoid last-minute surprises.
✅ Take Action: Calculate your TDS our TDS on Salary Calculator now!
FAQs on TDS vs Income Tax
Is TDS and Income Tax the same?
No, TDS (Tax Deducted at Source) is a form of advance tax collected by the government, whereas income tax is the total tax liability calculated on an individual's income for the financial year.
Can an employee get a refund on TDS?
Yes, if the total tax deducted (TDS) is more than the actual income tax liability, the employee can claim a refund by filing an Income Tax Return (ITR).
What happens if my employer does not deduct TDS?
If the employer fails to deduct TDS, they may face penalties from the Income Tax Department. However, the employee is still liable to pay the due tax while filing their ITR.
How can an employee check their TDS deduction?
Employees can check their TDS deduction in Form 16 provided by their employer and verify it through Form 26AS on the Income Tax e-filing portal.
Is TDS deducted on salary under the old and new tax regimes?
Yes, TDS is deducted under both tax regimes. However, the amount deducted varies based on applicable exemptions, deductions, and tax slabs chosen by the employee.
Post a Comment