Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) are both mechanisms implemented by the government to ensure smooth collection of taxes. While they might seem similar, they serve different purposes and are applicable under different circumstances. Let’s delve into the specifics of each and highlight their differences.
What is TDS?
Tax Deducted at Source (TDS) is a mechanism wherein tax is deducted at the time of payment itself. It is applicable on various incomes such as salary, interest, commission, rent, etc. TDS is deducted by the person making the payment (referred to as the deductor) and is then remitted to the government on behalf of the payee. The deducted amount is adjusted against the total tax liability of the payee.
Examples of TDS:
- Salary: Employers deduct TDS from their employees’ salaries based on their income tax slab rates.
- Interest Income: Banks deduct TDS on interest earned on fixed deposits if it exceeds a specified threshold.
- Rent: Individuals or entities paying rent exceeding a certain limit are required to deduct TDS before making the payment to the landlord.
In each of these examples, the person making the payment is responsible for deducting TDS and depositing it with the government.
What is TCS?
Tax Collected at Source (TCS), on the other hand, is the tax collected by the seller while making a sale. It is applicable when a seller collects payment from the buyer and is responsible for collecting tax on the sale of certain items. TCS is collected as a percentage of the sale amount and is remitted to the government by the seller.
Examples of TCS:
- Sale of Goods: TCS is applicable on the sale of certain goods like alcoholic liquor, tendu leaves, scrap, etc. The seller collects TCS from the buyer at the time of sale.
- Sale of Scrap: Businesses involved in selling scrap collect TCS from the buyer if the transaction exceeds a specified threshold.
In these instances, the seller is liable to collect TCS and deposit it with the government.
Key Differences:
| Criterion | TDS | TCS |
| Transaction Covered | Salary, interest, rent, commission etc. | On sale of tendu leaves, liquor, timber, scrap etc. |
| Person responsible | Individual or company making the payment | Individual or business selling the goods or service |
| Time of Deduction | When payment is due or made, whichever is earlier. | At the time of sale |
| Due Date for deposit to government | 7th of every month, though the returns have to be submitted quarterly | Deposited to the Government within 10 days from the month’s end in which it is supplied. |
| Form for Filing of Quarterly returns | Form 24Q (in case of salaries), Form 26Q (for others except salaries), and Form 27Q (for payments to NRIs) | Form 27EQ |
In conclusion, while TDS and TCS share the objective of ensuring tax compliance and revenue collection, they operate differently and are applicable in distinct scenarios. Eazybahi Solutions ensures the compliance of TDS and TCS in timely manner and saves you from late fees and penalties. With our user-friendly platform and expert team you can easily comply with the TDS and TCS tax rules. Reach out to us today for seamless and stress-free filing.