Difference between TDS and TCS
A guide to the difference between TDS and TCS
In this post, We will look at the differences between Tax Deducted at Source (TDS) and Tax Collected at Source (TCS). Let’s go through each section in detail:
What is TDS?
TDS is an abbreviation for Tax Deducted (or Withheld) at Source. According to Section 194Q, the income tax department requires any firm or individual to deduct Tax at the Source if the payment for goods and services exceeds Rs. 50 lakhs, such as rent, consultation, legal fees, royalties, technical assistance, and so on.
The government predetermines the TDS rates under the Income Tax Act.
In every TDS transaction, the firm or individual deducting TDS from the payment is known as the deductor, and the company or individual receiving the payment is referred to as the deductee.
What is TCS?
TCS, or Tax Collected at Source, is a tax levied on products by the seller and collected from the customer at the moment of sale. Section 206C of the Income Tax Act 1961 lists the items and services subject to TCS. The TCS threshold on the sale of goods is Rs. 50 lakhs.
Although both taxes are collected at the point of income/payment, TDS and TCS have many significant differences. Continue reading to learn the distinction between TDS and TCS.
Examples of TDS and TCS
List of TDS & TCS rates
What is the difference between TDS and TCS?
Below is a comparison between TDS and TCS regarding the applicability, rate, payment, and filing returns.
| Parameters | TDS | TCS |
| Applicability | Any source of income other than the sale of products | Purchase and sale of products |
| Deduction and Collection Point | Making a payment or debiting the accounts, whichever comes first | whatever comes first: receipt of sales revenues or debiting books of accounts |
| Deductor and Collector | The person who receives such services or pays the amount | Seller of products |
| Filing of Returns | Quarterly Form 24Q – Salary, Form 26Q – Other than Salary, Form 27Q – Deductee is an NRI | Quarterly Form 27EQ |
| Payment to the Government Deadline | 7th of the following monthMarch – 7th of April (Govt Deductors)30th of March (Other Deductors) | 7th of the following month |
| Interest in Deduction or Collection Default | Not Deducted – 1% each month or portion of a month 1.5% deducted but not paid to the government every month or part of the month | 1% each month or a portion of a month |
| Late Fee for Failure to File a Return | Rs 200 per month until the default continues | Rs 200 per month until the default continues |
| Failure to disclose PAN | TDS is charged at a flat rate of 20%. | 5% or twice the appropriate TCS rate, whichever is greater |
| Forms Required for a Lower or No Deduction or Collection | Form 15G and Form 15H, when appropriate. | Form 13 |
FAQ
1, What happens if you don't collect or deposit tax?
Ans: If a person fails to collect or deposit tax, he may face a fine of up to Rs. 1,000,000 and 3-7 years in prison.
2, Is TDS refundable?
Ans: In certain cases, the buyer of the goods can be refunded the TCS when the taxes are computed according to their income tax act. The Buyer’s Credit must also be reported in the income tax return.
3, Is it possible to change TCS using TDS?
Ans: No, TCS cannot be adjusted against TDS and vice versa. The points of collection and deduction are substantially different.
And with that, we end our discussion on the difference between TDS and TCS. If you have any questions, drop them in the comment section below.
