Difference between TDS and TCS
Updated On Feb 16, 2023
Table of Contents
The Indian government levies two types of taxes on the earning individuals in India - direct and indirect tax. TDS or what is called Tax Deducted at Sources and TCS or Tax Collected at Sources are types of indirect taxes that the government of India collects. TDS and TCS are also effective ways of tax evasion and make tax collection hassle-free. Many times, these terms become confusing and people use them interchangeably. So, to help you out, we have enlisted some of the primary differences between TDS and TCS. Read on to learn more about the same.
What is TDS?
TDS or Tax Deducted at Source was implemented in accordance with the Income Tax Act of 1961 to ensure tax collection directly at the source. To comply with the IT Act, it is dictated that every individual or organization that makes a transaction exceeding Rs. 50 lakhs for the purchase of any kind of goods or services. There are two important terms that are often used in regard to TDS: deductor and deductee. While the deductor is an individual or entity who is collecting the tax and the deductee on the other hand is an entity or individual who is receiving the tax.
What is TCS?
TCS or Tax Collected at Source is the tax deducted during the sale of goods and services to the buyer. This is mentioned under Section 206C (1H) of the Income Tax Act, 1961 and this act specifies that if a seller has a turnover of more than 10 crores and has a buyer who is buying goods or services of more than 50 lakhs is liable to collect taxes at the source. There are some instances where TCS is not collected such as the following:
- If the buyer has got tax deducted from any other source specified in the Income Tax Act
- If the sale is regarding the export of motor vehicles
- One is not required to pay TCS if he/she is a government employee, an employee at the high commission, an employee of the state government, an employee at the embassy, consulate, or similar.
Difference between TDS and TCS
Listed below are the differences between TDS and TCS:
|
Point of difference |
TDS |
TCS |
|
Meaning |
TDS denotes the tax that is deducted at the source |
TCS denotes the tax that is collected at the source |
|
Stage of collection/deduction |
TDS is deducted when the payment exceeds the threshold amount |
TCS is collected during the sale of goods |
|
Threshold amount |
This type of tax is levied if the transaction exceeds Rs. 50 lakhs |
TCS is collected if there is a sale of over Rs. 50 lakhs from the same buyer |
|
Transactions included |
The transaction includes wages, interests earned, brokerage, purchase of goods, rent, etc |
Here the transaction includes toll tickets, sale of goods, etc |
|
Who collects the tax |
The deductor makes TDS payment to the deductee |
The seller collects the tax and remits it to the government |
|
Returns filling |
It is done quarterly and form 24Q or 26Q is filled for the same |
Done quarterly and the form is 27Q |
|
Due date for payment |
This is done on the 7th of every month |
This should be done during the supply is done |
Apart from the differences, it should also be kept in mind that if there is any delay in the payment of TDS or TCS, then there will be required legal consequences. The fine typically ranges from Rs. 10,000 to Rs. 1,00,000. The penalties can increase if there is continued delay in the payments. So, ensure to make the payment for both TDS and TCS before the due date so that there are no legal or financial consequences.
Take Away
Now that you know the difference between TDS and TCS, we hope that you won’t use them interchangeably. It is also important to know about these differences so that you can easily enjoy hassle-free transactions every time you exceed the threshold amount.
Also read: Difference Between Fixed Deposits And Recurring Deposits
