Difference Between TDS and TCS Explained

TDS vs TCS — (Source: gumlet.assettype.com)

Individuals often get confused trying to understand the difference between TDS and TCS. TDS or Tax Deducted at Source is the tax deducted at the initiation of a transaction by a payer. At the same time, the Tax Collected at Source is what a seller collects when a buyer purchases anything from him/her.

Want to know more details about the difference between TDS and TCS? Continue reading!

What Is the Difference Between TDS and TCS?

The difference between TCS and TDS is explained in the below mentioned table,

Parameters	Tax Deducted at Source (TDS)	Tax Collected at Source (TCS)
Meaning	It is deducted from a company or individual if the transaction exceeds a given limit.	A seller collects this tax when selling commodities to the buyer.
When to Pay?	When the transaction exceeds the threshold limit. (The limit depends on each payment type)	Sale of specified goods applicable to TCS (except used for manufacturing and production)
On What to Pay?	The payment is valid on receipt of rent, salaries, commission, brokerage and others.	TCS applies to certain commodities such as timber, wood, minerals, and others
Who Is Responsible for Collecting or Deducting the Tax?	A payer (deductor) who is making a specified payment to another individual (deductee) will deduct the tax at the source and return the same to the Central Government. The deductee can get exemption from TDS after submitting Form 26AS (TDS certificate).	The seller is only responsible for collecting TCS from the buyer and again paying it to the Central Government.

You can understand the difference between TCS and TDS better with examples of both TDS and TCS. Let's take a look!

Understanding TDS with an Example

Suppose you are paying rent of ₹60,000 for your office to a property owner.

Parameters	Amount
Total Annual Rent	₹7,20,000
TDS Rates Applicable	10%
Actual Rent Paid to Owner	₹(60,000-10%*60,000) = ₹54,000

The TDS amount thus deducted is ₹6,000 per month as the total annual rent is beyond the tax-free limit of ₹2,50,000.

Understanding TCS with an Example

If you sell products such as tendu leaves worth ₹60,000 to a buyer, you will collect the following amount of TCS,

Parameters	Amount
Price of Goods Sold	₹60,000
TCS Rates Applicable	5%
Actual Price Paid by Buyer	₹(60,000+5%*60,000)= ₹63,000

Thus, you will collect ₹3,000 as TCS.

The calculation process of TDS and TCS depends on the applicable rates. Want to know about these rates; read on.

Different TDS and TCS Rates Applicable for F.Y 2021-22

The applicable TDS and TCS rates are different for each payment type and commodity.

Refer to the table below to understand the applicable TDS rates better -

TDS Rates for Indian Residents

Payment Types (Salary)	Threshold Limit for Deduction of Tax (As per the slab rates)	TDS Rates (Slab Rates)
Premature EPF withdrawal	₹500000	10%
Interest on securities	₹2500	10%
Income from horse race winnings, etc.	₹10000	30%
Income from winnings from lotteries, crossword puzzles, card games and other games of any type	₹10000	30%
Commission on insurance policy	₹10000	5%
Rent on machinery and plant	₹240000	2%
Rent on land or building or furniture and fitting	₹240000	10%

TDS Rates for NRIs

Payment Types (Salary + Rent)	Threshold Limit for Deduction of Tax (As per the slab rates)	TDS Rates (Slab Rates)
Premature EPF withdrawal	₹500000	10.40%
Payment to National Savings Scheme	₹2500	10%+ Cess+ Surcharge (if applicable)
Income horse race winnings etc.	₹10000	31.20%
Income from lottery, card games,	₹10000	31.20%
Investment made in a securitisation fund	NA	31.20%
Payment to NRI sportsman or sports association	N/A	20%
Income from long-term capital gains	NA	10.40%

TDS Rates for Domestic Companies

Payment Types (Salary + Rent)	Threshold Limit for Deduction of Tax (As per the slab rates)	TDS Rates (Slab Rates)
Income by way of winnings from lotteries, crossword puzzles, card games and other games of any sort	₹10000	30%
Income by way of winnings from horse racing	₹10000	30%
Commission on insurance	₹15000	10%
Brokerage or commission	NA	5%
Selling of goods through e-commerce platform	₹500000	1%
Rent on plant and machinery	₹240000	2%
Payment in respect of deposit under National Savings scheme	₹2500	10%
Payment on account of repurchase of unit by Mutual Fund or Unit Trust of India	NA	20%
Commission on sale of lottery ticket	₹15000	5%
Commission or brokerage	₹15000	5%
Transfer of certain immovable property other than agriculture land	₹5000000	1%
Fees for professional or technical services	₹30000	2% 10% (in certain cases)
Investment fund paying an income to a unit holder [other han income which is exempt under Section 10(23FBB)]	NA	10%
Payment of commission, brokerage, contractual fee, professional fee to a resident person by an Individual or a HUF who are not liable to deduct TDS under section 194C, 194H, or 194J.	₹5000000	5%

TDS for Non-domestic Companies (Foreign Companies)

Payment Types	Threshold Limit for Deduction of Tax (As per the slab rates)	TDS Rates (Slab Rates)
Income by way of winnings from lotteries, crossword puzzles, card games and other games of any sort	₹10000	31.2%
Income by way of winnings from horse races	₹10000	31.2%
Distribution of, any interest received or receivable from SPV by Business trust	NA	5.20%
Distribution of, any income received from renting or leasing or letting out any real estate asset owned directly by Business trust	NA	41.60%
Payment of interest on infrastructure debt fund to Non Resident	NA	5.20
Investment fund paying an income to a unit holder [other han income which is exempt under Section 10(23FBB)]	NA	41.60%
Income in respect of investment made in a securitization trust (specified in Explanation of section115TCA)	NA	41.60%

As you are aware of the different TDS rates applicable across categories of taxpaying entities, you must know the applicable TCS rates as well. Take a look!

TCS Rates on the Sale of Different Commodities

Below is given different TCS rates on the sale of different commodities

Commodity Types	TCS Rates Applicable
Timber wood under a forest leased	2.50%
Timber wood other than forest leased	2.50%
Forest produces except tendu and timber	2.50%
Parking lot, toll plaza, quarrying and mining	2%
Minerals	1%
Alcohol	1%
Motor vehicles worth over ₹10,00,000	1%
Scrap	1%
Bullion worth over ₹2,00,000 or jewellery worth over ₹5,00,000	1%
Tendu leaves	5%

Now that you are aware of the primary differences between TDS and TCS rates, the next job is to learn about the applicability of TDS/TCS exemptions, due dates to deposit these taxes and penalty charges.

When Are TDS Exemptions Applicable on Interest Income?

Financial institutions deduct TDS from the interest earned on fixed deposits. It is mainly applicable when your interest income exceeds ₹40,000 and ₹50,000 for senior citizens.

However, if your total income is below the taxable limit, you can declare the same in Forms 15G or 15H. This will prevent financial institutions from making TDS deductions.

Here is a table explaining the different eligibility requirements to use Form 15G and Form 15H.

Parameters	15G	15H
Eligibility	Indian individuals, HUFs or trusts. No companies and NRIs are eligible for TDS exemption.	Same as 15H
Age limit	Less than 60 years	More than 60 years
Tax liability	Nil	Nil
Total taxable income in the financial year	₹2,50,000	₹3,00,000 (for 60-80 years) ₹5,00,000 (for more than 80 years)
Total interest income	₹2,50,000	Taxable income must be within the exemption limit.

Remember you must provide a PAN card to claim this benefit.

When Are TCS Exemptions Applicable on Purchase of Goods?

TCS exemptions are available in the following circumstances,

When individuals use eligible goods for their personal consumption,
When buyers purchase goods for the purpose of manufacturing, production but not for trading those goods.

Note: You can also enjoy tax exemption in TCS. For this, you need to submit Form 27C and Form 13.

Due Date of TDS and TCS Payment

Read the table mentioned below to know the due dates of TDS and TCS payment,

Mode of TDS/TCS Payment	Due Dates of Payment
When tax payment is done without an income tax challan	On same day
TDS/TCS done on the month of March	On or before 30th April
TDS/TCS done in months except March	On or before 7 days from the month end
TDS on rent	On or before 30 days from the end of month of deduction
TDS on purchase of immovable property	On or before 30 days from the end of month of deduction

Penalty for Non-Payment of TDS and TCS

As a taxpayer, if you default in paying the TDS to the Income Tax Department within the due date, you are liable to pay a monthly penalty of 1.5% of the tax amount. If you fail to deduct the TDS, a monthly 1% penalty is applicable.

In case of non-payment of TCS, you need to pay a monthly penalty of 1% of the tax amount.

In both cases, individuals are subject to imprisonment up to 7 years or face other legal consequences.

As you have a detailed understanding of the difference between TDS and TCS, due dates; try to make timely payment to avoid legal consequences.

Stay updated with the latest news as taxation is subject to changes. Having knowledge of new amendments will make filing your tax returns hassle-free.

Frequently Asked Questions

All

Is TCS applicable if the TDS is already deducted?

Under section 206 C (1H), a seller will not collect TCS if a buyer is liable to pay TDS. Additionally, he will also determine whether a buyer deducts the TDS while making the final payment.

What is the mode of payment of TDS and TCS?

All corporate firms and eligible taxpayers can pay TDS and TCS online. You can visit this official portal to pay your TDS and TCS online.

For offline payment, you need to download and submit Challan 281 to an authorised bank.

What is the time limit to get my TDS refund?

It takes nearly 3 to 6 months for the TDS refund to reflect on your bank account. It also depends on the completion of e-verification.