TDS and TCS are two of the government’s most important sources of revenue. It’s also critical for businesses to pay their taxes on time to avoid penalties and remain compliant.
Read on to learn more about the differences between TDS and TCS, as well as their implications for organizations.
Also Read: TDS/TCS Consultancy services
What exactly is TDS?
The abbreviation TDS (Tax Deducted (or Withheld) at Source) stands for Tax Deducted (or Withheld) at Source. The income tax department requires any firm or individual to deduct tax at the source if the payment for goods and services above Rs. 50 lakhs, such as rent, consultation, legal fees, royalty, technical services, and so on.
The deductor is the firm or person who deducts TDS from a payment, whereas the deductee is the company or person who receives the payment.
What exactly is TCS?
TCS is for Tax Collected at Source, and it is a tax levied on goods by the seller, who collects it from the buyer at the point of sale. The items and services that are subject to TCS are defined under Section 206C of the Income Tax Act of 1961. TCS on the sale of goods has a limit of Rs. 50 lakhs.
TDS and TCS are both levied at the point of origin of income/payment, however there are a few key variations between them. To discover more about the distinctions between TDS and TCS, keep reading.
What is the difference between TDS and TCS?
Meaning:
Any organization or individual making a payment that exceeds the specified thresholds must deduct TDS at the source.
TCS is a tax that the seller collects at the moment of sale.
Transactions Covered
TDS applies to interest, wages, brokerage, professional fees, commission, product purchases, rent, and other expenses.
Timber, scrap, minerals, whiskey, tendu leaves, forest goods, autos, and toll tickets are all subject to TCS.
Limits
TDS is applicable on the acquisition of goods if the sum exceeds Rs. 50 lakhs, as per Section 194Q.
TCS is levied on the sale of goods if the value exceeds Rs. 50 lakhs, as per Section 206C (1H).
Rates
For purchases of items above Rs. 50 lakhs, the tax deduction rate (TDS) is 0.1 percent.
The tax collection rate (TCS) for the sale of products is 0.1 percent of the selling price over Rs. 50 lakhs.
Deduction/Collection Period
TDS is deducted either when a payment is due or when it is received, depending on which comes first.
The seller is responsible for collecting TCS at the time of sale.
Person Responsible
The individual (or company) making the payment is responsible for deducting TDS.
The individual (or company) selling the specified products is responsible for collecting TCS.
Non-Compliance Penalties
If the deductor/collector fails to pay TDS on time and file their TDS/TCS return appropriately, they may be punished under Section 271H. For filing an inaccurate TDS/TCS return, the deductor/collector can be penalized a minimum of Rs. 10,000 and a maximum of Rs. 1,00,000. In addition, under Section 201(1A) of the Income Tax Act, non-deduction of TDS is subject to a monthly interest rate of @1.5 percent from the day on which tax was deductible until the date on which tax is deducted.
Late TDS payments will be charged the same 1.5 percent interest from the date of deduction to the date of payment.
