2 min
11 March 2025
Are you confused about the difference between TDS and income tax? Many taxpayers in India mix up these two concepts, but they serve different purposes in our taxation system. TDS (Tax Deducted at Source) and income tax are related but distinct components that affect how you pay taxes. The difference between TDS and income tax lies in their collection methods, applicability, and overall purpose in the taxation framework.
When you earn money in India, you need to understand both these tax concepts to manage your finances effectively. The difference between TDS and income tax becomes particularly important when planning major financial decisions such as applying for a home loan. Lenders like Bajaj Housing Finance often review your tax compliance history when evaluating loan applications.
This article will explain the key differences between TDS and income tax in simple terms. We will break down each concept individually and then compare them side by side. You will also learn how proper tax compliance can benefit you when applying for a home loan with Bajaj Housing Finance.
What is TDS?
TDS stands for Tax Deducted at Source. It is a mechanism where tax is collected at the source of income rather than at a later date. The difference between TDS and income tax starts with how they are collected. With TDS, the person making the payment deducts a certain percentage of tax before paying you the remaining amount.
For example, when your employer pays your salary, they deduct TDS based on your income tax bracket. Similarly, banks deduct TDS on interest earned from fixed deposits. The person who deducts TDS must deposit this amount with the government and provide you with a TDS certificate.
TDS was introduced to prevent tax evasion and ensure regular tax flow to the government. It applies to various payments like salaries, professional fees, rent, and interest on securities. The difference between TDS and income tax is that TDS is just one method of collecting income tax in advance.
What is income tax?
Income tax is a direct tax imposed by the government on the income earned by individuals and businesses during a financial year. Unlike TDS, which is just a collection mechanism, income tax is the actual tax liability based on your total income. The difference between TDS and income tax is clear when we look at their scope.
Income tax applies to all your income sources, including salary, business profits, capital gains, rental income, and other sources. The government sets different tax rates for different income slabs, which are announced in the annual budget. You calculate your tax liability based on these slabs and your total income.
The income tax system in India is progressive, meaning higher income earners pay a higher percentage of tax. Every taxpayer must file an annual income tax return, declaring all income sources and claiming deductions and exemptions. This comprehensive approach marks a key difference between TDS and income tax.
Top 10 differences between TDS and income tax
The difference between TDS and income tax can be understood through these key distinctions:
Understanding the difference between TDS and income tax helps you monitor your tax obligations and ensure compliance with tax laws. This knowledge is also valuable when applying for financial products like home loans.
Benefits of income tax return filing for home loan
Filing your income tax returns regularly offers several advantages when applying for a home loan:
Applying for a Bajaj Housing Finance Home Loan is a straightforward process:
To qualify for a Bajaj Housing Finance Home Loan, you must meet these eligibility requirements:
When applying for a Bajaj Housing Finance Home Loan, your tax compliance history can significantly impact your application. Here is how proper tax management benefits your home loan prospects:
Access to attractive interest rates: Bajaj offers interest rates starting from 7.99%* p.a. to borrowers with good financial records.
Flexible repayment options: Enjoy a lengthy tenure of up to 32 years to repay your loan in comfortable EMIs.
Additional financing options: A good tax history improves your eligibility for a top-up loan of up to Rs. 1 crore over your existing home loan.
Faster approvals: Clean tax records contribute to Bajaj's promise of loan approval within 48 hours*.
No foreclosure charges: Individual borrowers with floating interest rate loans can foreclose without additional fees, a significant saving opportunity.
Ready to turn your home ownership dreams into reality? Apply for a Bajaj Housing Finance Home Loan today and leverage your good tax compliance record for a smooth approval process. Get started on your journey to owning your dream home with affordable EMIs as low as Rs. 722/lakh*.
When you earn money in India, you need to understand both these tax concepts to manage your finances effectively. The difference between TDS and income tax becomes particularly important when planning major financial decisions such as applying for a home loan. Lenders like Bajaj Housing Finance often review your tax compliance history when evaluating loan applications.
This article will explain the key differences between TDS and income tax in simple terms. We will break down each concept individually and then compare them side by side. You will also learn how proper tax compliance can benefit you when applying for a home loan with Bajaj Housing Finance.
What is TDS?
TDS stands for Tax Deducted at Source. It is a mechanism where tax is collected at the source of income rather than at a later date. The difference between TDS and income tax starts with how they are collected. With TDS, the person making the payment deducts a certain percentage of tax before paying you the remaining amount.
For example, when your employer pays your salary, they deduct TDS based on your income tax bracket. Similarly, banks deduct TDS on interest earned from fixed deposits. The person who deducts TDS must deposit this amount with the government and provide you with a TDS certificate.
TDS was introduced to prevent tax evasion and ensure regular tax flow to the government. It applies to various payments like salaries, professional fees, rent, and interest on securities. The difference between TDS and income tax is that TDS is just one method of collecting income tax in advance.
What is income tax?
Income tax is a direct tax imposed by the government on the income earned by individuals and businesses during a financial year. Unlike TDS, which is just a collection mechanism, income tax is the actual tax liability based on your total income. The difference between TDS and income tax is clear when we look at their scope.
Income tax applies to all your income sources, including salary, business profits, capital gains, rental income, and other sources. The government sets different tax rates for different income slabs, which are announced in the annual budget. You calculate your tax liability based on these slabs and your total income.
The income tax system in India is progressive, meaning higher income earners pay a higher percentage of tax. Every taxpayer must file an annual income tax return, declaring all income sources and claiming deductions and exemptions. This comprehensive approach marks a key difference between TDS and income tax.
Top 10 differences between TDS and income tax
The difference between TDS and income tax can be understood through these key distinctions:
| Parameter | TDS | Income Tax |
| Definition | Tax deducted at source before payment reaches the recipient | Tax paid on total income earned during a financial year |
| Who pays | Deducted by the payer (employer, bank, etc.) | Paid directly by the taxpayer to the government |
| Timing | Deducted at the time of making payment | Paid after calculating total income at year-end or through advance tax |
| Coverage | Applies only to specific income types | Applies to all income sources combined |
| Purpose | Ensures regular tax collection and reduces evasion | Main tax liability based on total income |
| Amount | Fixed percentage based on payment type | Calculated based on progressive tax slabs |
| Refund option | Can be claimed as refund if excess TDS is deducted | Refund given if total tax paid exceeds actual liability |
| Legal sections | Governed by sections 192-196D of Income Tax Act | Governed by sections 4-9 of Income tax Act |
| Responsibility | Payer is responsible for deduction and deposit | Taxpayer is responsible for calculation and payment |
| Adjustment | Adjusted against final tax liability in tax return | Final amount calculated after all adjustments |
Understanding the difference between TDS and income tax helps you monitor your tax obligations and ensure compliance with tax laws. This knowledge is also valuable when applying for financial products like home loans.
Benefits of income tax return filing for home loan
Filing your income tax returns regularly offers several advantages when applying for a home loan:
- Proof of income verification: Lenders like Bajaj Housing Finance use your income tax returns to verify your income stability. Your ITR forms provide a reliable record of your earnings over multiple years, helping them assess your loan repayment capacity.
- Higher loan eligibility: Properly filed tax returns reflecting your actual income can increase your loan eligibility. Bajaj Housing Finance offers home loans up to Rs. 15 crore based on your verified income, and accurate tax filing helps maximise this amount.
- Better interest rates: Consistent tax compliance improves your credibility as a borrower. This can help you negotiate better interest rates, potentially bringing them closer to Bajaj Housing Finance's starting rate of 8.25% p.a.
- Easier approval process: Clean tax records speed up the loan approval process. Bajaj Housing Finance promises approval within 48 hours, and proper tax documentation helps achieve this timeline.
- Access to income tax calculator tools: Using income tax calculators helps plan your finances better, including EMI affordability. Considering the current income tax slabs while planning your home loan ensures you can manage repayments comfortably.
- Proof of financial discipline: Regular tax filing demonstrates financial responsibility, which lenders value highly. This can positively influence your home loan application with Bajaj Housing Finance.
Applying for a Bajaj Housing Finance Home Loan is a straightforward process:
- Enter your personal details including full name, mobile number, and employment type.
- Select your preferred loan type: fresh home loan, balance transfer, or top-up loan.
- Verify your phone number with the OTP sent to you.
- Provide additional information such as monthly income, required loan amount, and property details.
- Submit your date of birth, PAN number, and other occupation-specific details as requested.
- Click on the 'SUBMIT' button to complete your application.
- A Bajaj Finserv representative will contact you to guide you through the remaining steps.
To qualify for a Bajaj Housing Finance Home Loan, you must meet these eligibility requirements:
- You must be an Indian citizen residing in India.
- Age requirement: Salaried applicants must be between 23-67 years, while self-employed professionals must be between 23-70 years (at loan maturity).
- A CIBIL Score of 725 or higher improves your chances of loan approval and better home loan interest rates.
- You must be a salaried employee, professional individual, or self-employed individual.
- The documents required for home loan include KYC documents, income proof (salary slips or P&L statements), business proof for self-employed applicants, and 6 months of bank statements.
Making tax compliance work for your home loan dreams
Understanding the difference between TDS and income tax is essential for every taxpayer in India. While TDS is a tax collection mechanism at the source of income, income tax is your overall tax liability based on your total earnings. Being tax-compliant not only fulfils your civic duty but also strengthens your financial profile.When applying for a Bajaj Housing Finance Home Loan, your tax compliance history can significantly impact your application. Here is how proper tax management benefits your home loan prospects:
Access to attractive interest rates: Bajaj offers interest rates starting from 7.99%* p.a. to borrowers with good financial records.
Flexible repayment options: Enjoy a lengthy tenure of up to 32 years to repay your loan in comfortable EMIs.
Additional financing options: A good tax history improves your eligibility for a top-up loan of up to Rs. 1 crore over your existing home loan.
Faster approvals: Clean tax records contribute to Bajaj's promise of loan approval within 48 hours*.
No foreclosure charges: Individual borrowers with floating interest rate loans can foreclose without additional fees, a significant saving opportunity.
Ready to turn your home ownership dreams into reality? Apply for a Bajaj Housing Finance Home Loan today and leverage your good tax compliance record for a smooth approval process. Get started on your journey to owning your dream home with affordable EMIs as low as Rs. 722/lakh*.
