Income Tax and Income Tax Return (ITR) are often used interchangeably in everyday conversations about personal finance. However, they serve two very different purposes in India’s taxation framework. Understanding the distinction is vital to avoid errors during tax filing and to ensure compliance with income tax laws.
Income tax is a direct tax levied by the central government on the income earned by individuals and entities above a specified threshold. The authority to levy and collect this tax is provided by the Income Tax Act of 1961.
Income under this Act is not limited to salary. It includes:
Entities required to pay income tax include individuals, Hindu Undivided Families, partnerships, LLPs, companies, AOPs, and BOIs.
An Income Tax Return is a formal record submitted annually to the Income Tax Department detailing a taxpayer’s income, tax liability, and tax paid in a given financial year. Filing an ITR helps calculate tax dues or refunds, if any.
Every taxpayer must file the ITR within the due date notified by the department. For individuals, the due date for FY 2022-23 was July 31. Missing this deadline may attract penalties.
Income tax is the amount payable on earnings in a financial year, based on applicable slabs and deductions. ITR, on the other hand, is the annual submission of income details and taxes paid.
Here’s how they differ:
Criteria | Income Tax | Income Tax Return |
Purpose | Payment to the government | Record submitted to the tax department |
Definition | Tax on income earned | Statement of income and taxes paid |
Frequency | Paid during the year (quarterly or TDS) | Filed once after the financial year ends |
Use | Revenue for government | Assessment of taxpayer’s compliance |
Only ITR-1 and ITR-4 can be filed completely online. Here are the steps:
As of FY 2024-25, the new regime is the default, but taxpayers can opt for either. Here’s a comparison of the tax slabs:
New Tax Regime
Income Range | Tax Rate |
₹0–3 Lakhs | Nil |
₹3–7 Lakhs | 5% |
₹7–10 Lakhs | 10% |
₹10–12 Lakhs | 15% |
₹12–15 Lakhs | 20% |
Above ₹15 Lakhs | 30% |
Note: Rebate available for income up to ₹7 Lakhs
Old Tax Regime
Income Range | Tax Rate |
₹0–2.5 Lakhs | Nil |
₹2.5–5 Lakhs | 5% |
₹5–10 Lakhs | 20% |
Above ₹10 Lakhs | 30% |
Note: Rebate available up to ₹5 Lakhs
Income tax is the amount paid on income, whereas ITR is the record submitted to report that income and the taxes paid. Filing your ITR correctly ensures you stay compliant and can claim refunds where applicable. With e-filing now available, the process is more accessible than ever. Understanding these basic concepts is key to navigating the tax system effectively.
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.
Investments in the securities market are subject to market risks, read all the related documents carefully before investing.
Published on: Mar 27, 2025, 7:21 PM IST
Akshay Shivalkar
Akshay Shivalkar is a financial content specialist who strategises and creates SEO-optimised content on the stock market, mutual funds, and other investment products. With experience in fintech and asset management, he simplifies complex financial concepts to help investors make informed decisions through his writing.
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