Income Tax and Income Tax Return (ITR) are the two terms that are used very often when discussing personal finance. Though these two terms may sound very similar, they have two very different meanings and implications, as per the Indian tax system. 

 

If you are a taxpayer, it is important for you to know what is the difference between ITR and Income Tax. However, if you are not sure about the distinction between the two, you may make costly errors when filing your income tax return.

 

So, read on to know how income tax and ITR differ from each and how you can file an e-ITR by yourself.

What is the Meaning of Income Tax?

The Income Tax is a direct tax that the government levies on citizens who earn an income above a particular threshold. The Income Tax Act of 1961 has vested power in the Central government to levy and collect income tax in India.

 

Not just that, the central government can also make amendments to the various provisions of this Act through the Union Budget. However, to understand what income tax is, you need to know the various aspects that constitute the term ‘income’.

 

Note that income is not just the salary that you receive every month. The following elements are considered as part of your annual income:

  • Professional gains such as a bonus

  • Rent from residential or commercial property

  • Profits from a business

  • Capital gains from investments

  • Income from other sources like dividends, royalty, or lottery

 

Moreover, the Income Tax Act of 1961 has also classified types of taxpayers that must pay a part of their earnings as Income Tax. These include:

  • Individuals

  • Hindu Undivided Families (HUF)

  • Association of Persons (AOP)

  • Body of Individuals (BOI)

  • Limited Liability Partnership (LLP)

  • Firms

What is an Income Tax Return?

Every taxpayer needs to file an Income Tax Return (ITR) by the end of each financial year, i.e., between April 1 to March 31. An ITR is a form that discloses information about the taxpayer’s income and tax to the Indian Income Tax Department.

 

In case, the ITR shows that you have paid excess taxes, the Income Tax Department provides you with an income tax refund. 

 

The Income Tax Department notifies a due date by which the individuals or businesses need to submit their ITR. For instance, the due date to file an ITR for the financial year 2022-23 for individuals has been notified as July 31. Failing to meet this deadline has consequences. 

Income Tax vs Income Tax Return: What is the Difference?

With an answer to the question, “What are Income Tax and Income Tax Return?”, the next step is to learn how they differ from each other.  

 

When it comes to income tax, it is the amount you have to pay as a tax on your earnings in a financial year. The tax liability is calculated based on income, the tax slab under which you fall, and other factors such as: 

  • Rebate

  • Savings

  • Investments

  • Deductions 

 

Calculating your tax liability is a complicated process. However, you can make it way easier by using the income tax calculator available on Bajaj Markets. With this online tool, you can get to know the amount payable as tax for the given year within seconds.

 

Income tax return, on the other hand, is the annual record of the following in a given financial year: 

  • The annual income

  • Tax liability

  • Tax paid

  • Investments 

 

This record contains all the relevant financial information, making it viable for submissions to authorities. Moreover, it has the right format known as an income tax return file. Therefore, income tax is the amount that you (the taxpayers) pay, and the income tax return is the yearly record of the same.

How Do You File an e-ITR?

With a better idea of the ITR vs income tax comparison, you can now learn the processes of filing your ITR. The Income Tax Department introduced an e-filing facility for Income Tax Returns in 2006-07. Using this feature, you can file your ITR online without having to visit the Income Tax Department office. 

 

However, currently, only ITR-1 (also called Sahaj) and ITR-4 (also called Sugam) can be filed completely online. 

 

Here is how you can do it in simple steps:

  • Step 1: Visit the Income Tax Department website

  • Step 2: Log in using your PAN and password 

  • Step 3: Choose the assessment year

  • Step 4: Select the Income Tax Return form based on your eligibility

  • Step 5: Click on the ‘Prepare and Submit Online’ button

  • Step 6: Enter the required details to proceed

  • Step 7: Fill out the form with accurate information

  • Step 8: Click on the ‘Preview’ button

  • Step 9: Check if all the details mentioned by you are accurate and up-to-date 

  • Step 10: Submit the form

  • Step 11: Once submitted, verify the details using Aadhaar or Electronic Verification Code (EVC)

What is the Difference Between Old and New Tax Regimes?

In the 2023-24 Union Budget, the finance minister announced that the new tax regime would be the default one. However, you can opt for either the old or new tax regime based on your preference. 

 

To help you out in selecting the best regime for you, here are the tables showcasing the difference between tax slabs under both regimes:

New Tax Regime (Default)

Net Annual Income Range

New Regime Tax Rate

₹0-3 Lakhs

Nil 

₹3-6 Lakhs 

5%

₹7-9 Lakhs

10%

₹9-12 Lakhs

15%

₹12-15 Lakhs

20%

Above ₹15 Lakhs

30%

Note: Individuals with an annual income of up to ₹7 Lakhs are eligible to claim tax rebates under the new tax regime.

Old Tax Regime

Net Annual Income Range

Old Regime Tax Rate

₹0-2.5 Lakhs

Nil 

₹2.5-5 Lakhs 

5%

₹5-7.5 Lakhs

20%

₹7.5-10 Lakhs

20%

₹10-12.5 Lakhs

30%

₹12.5-15 Lakhs

30%

Above ₹15 Lakhs

30%

Note: Individuals with an annual income above ₹5 Lakhs are eligible to enjoy tax rebates under the old tax regime. 

 

In conclusion, the difference between ITR and income tax, the latter is a direct tax that you pay to the government. This tax is levied on your earnings in a financial year. On the other hand, an Income Tax Return is the record of your income, tax liability, and tax paid. 

 

Understanding these key terms is crucial for any citizen, even if you aren’t a taxpayer. It provides insight into the financial arena and the formalities applicable. 

FAQs About the Difference Between Income Tax and Income Tax Return

What is the main difference between Income Tax and Income Tax Returns?

The income tax is the taxable amount on your income that you have to pay. On the other hand, the income tax return is the yearly record of the same.

Can I file an Income Tax Return Online?

Yes, you can file ITR-1 and ITR-4 online on the Income Tax Department portal.

What is the due date for filing the ITR?

The due date for filing the ITR for the financial year 2022-23 is July 31.

What is considered a part of my income under the Income Tax Act of 1961?

The Income Tax Act of 1961 considers salaries, profits, gains, rent, royalties, etc., as part of your taxable income. 

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