Income Tax: What is the difference between TCS and TDS?

Income Tax: The Indian Income Tax system is intricate as it covers important aspects of the economy. There are various concepts in Income Tax and one concept that is often confusing for taxpayers is the difference between Tax Deducted at Source or TDS and Tax Collected at Source or TCS.

Let us understand both concepts in detail.

Income Tax: What is Tax Deducted at Source or TDS?

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TDS is the amount deducted from payments made for specified services. The source can be professional fees, contract payments, commission and royalty payments and so on. TDS can also be applied to certain types of investment including interest earned from fixed deposits and other deposits in banks, post offices, and so on.

The concept of TDS was introduced with the aim to collect tax from the source of income.

Income Tax: How does TDS work?

According to the concept of TDS, a person or an institute (deductor) who is liable to make payment for service shall deduct tax at source and remit the same into the account of the Central Government.

This TDS amount can be claimed back on the basis of Form 26AS for the TDS certificate issued by the deductor.

Income Tax: TDS tax slab

Section	Nature of transaction	Threshold Limit (Rs)	TDS Rate
192	Payment of salary	Basic exemption limit of employee	Normal Slab Rates
192A	Premature withdrawal from EPF	50,000	10%
193	Interest on securities	Debentures- 5,000 8% Savings (Taxable) Bonds 2003 or 7.75% Savings (Taxable) Bonds 2018- 10,000 Other securities- No limit	10%
194	Payment of any dividend	5,000	10%
194A	Interest from other than interest from securities (from deposits with banks/post office/co-operative society)	Senior Citizens- 50,000 Others- 40,000	10%
194A	Interest from other than interest on securities u/s 193 and interest from banks/post office/co-operative society. For e.g., interest from friends and relatives	5,000	10%
194B	Income from lottery winnings, card games, crossword puzzles, and other games of any type	10,000	30%
194BB	Income from horse race winnings	10,000	30%
194C	Payment to contractor/sub-contractor:- Individuals/HUF	Single transaction- 30,000 Aggregate transactions- 1,00,000	1%
194C	Payment to contractor/sub-contractor:- Other than Individuals/HUF	Single transaction- 30,000 Aggregate transactions- 1,00,000	2%
194D	Insurance commission to domestic companies	15,000	10%
194D	Insurance commission to other than companies	15,000	5%
194DA	Income for the insurance pay-out, while payment of any sum in respect of a life insurance policy.	1,00,000	5%
194E	Payment to non-resident sportsmen/sports association	No limit	20%
194EE	Payment of amount standing to the credit of a person under National Savings Scheme (NSS)	2,500	10%
194F	Payment for the repurchase of the unit by Unit Trust of India (UTI) or a Mutual Fund	No limit	20%
194G	Payments, commission, etc., on the sale of lottery tickets	15,000	5%
194H	Commission or brokerage	15,000	5%
194-I	Rent on plant and machinery	2,40,000	2%
194-I	Rent on land/building/furniture/fitting	2,40,000	10%
194-IA	Payment in consideration of transfer of certain immovable property other than agricultural land.	50,00,000	1%
194-IB	Rent payment by an individual or HUF not covered u/s. 194-I	50,000 per month	5%
194-IC	Payment under Joint Development Agreements (JDA) to Individual/HUF	No limit	10
194J	Any sum paid by way of fee for professional services	30,000	10%
194J	Any sum paid by way of remuneration/fee/commission to a director	30,000	10%
194J	Any sum paid for not carrying out any activity concerning any business;	30,000	10%
194J	Any sum paid for not sharing any know-how, patent, copyright, etc.	30,000	10%
194J	Any sum paid as a fee for technical services	30,000	2%
194J	Any sum paid by way of royalty towards the sale or distribution, or exhibition of cinematographic films	30,000	2%
194J	Any sum paid as fees for technical services, but the payee is engaged in the business of operation of the call center.	30,000	2%
194K	Payment of any income for units of a mutual fund, for example, dividend	No limit	10%
194LA	Payment in respect of compensation on acquiring certain immovable property	2,50,000	10%
194LB	Payment of interest on infrastructure debt fund to Non-Resident	No limit	5%
194LC	Payment of interest for the loan borrowed in foreign currency by an Indian company or business trust against loan agreement or the issue of long-term bonds	No limit	5%
194LC	Payment of interest for the loan borrowed in foreign currency by an Indian company or business trust against the issue of long-term bonds listed in IFSC	No limit	4%
194LD	Payment of interest on bond (rupee-denominated) to FII or a QFI	No limit	5%
194LBA(1)	Certain income distributed by a business trust to its unitholder	No limit	10%
194LBA(2)	Interest income of a business trust from SPV distribution to its unitholders	No limit	5%
194LBA(2)	Dividend income of a business trust from SPV, in which it holds the entire share capital exempt the capital held by the government, and distribution to its unitholders	No limit	10%
194LBA(3)	Rental income payment of assets owned by the business trust to the unitholders of such business trust	No limit	30%
194LBA(3)	Rental income payment of assets owned by the business trust to the unitholders of such business trust	No limit	40%
194LBB	Certain income paid to a unitholder in respect of units of an investment fund	No limit	10%
194LBB	Certain income paid to a unitholder in respect of units of an investment fund	No limit	40%
194LBC	Income from investment in securitisation fund received to an individual and HUF	No limit	25%
194LBC	Income from investment in securitisation fund received to a domestic company	No limit	10%
194LBC	Income from investment in securitisation fund received to a foreign company	No limit	40%
194LBC	Income from investment in securitisation fund received to NRI	No limit	10%
194M	Certain payments by Individual/HUF not liable to deduct TDS under Section 194C, 194H, and 194J	50,00,000	5%
194N	Cash withdrawal exceeding a certain amount	1 crore	2%
194N	Cash withdrawal in case person not filing ITR for last three years and the original ITR filing due date expired	-20 lakh to 1 crore -1 crore	2% 5%
194O	Payment for the sale of goods or provision of services by the e-commerce operator through its digital or electronic facility or platform.	5,00,000	1%
194P	Payment of pension or interest to specified senior citizens of age 75 years or more	Basic exemption limit of senior citizens or super senior citizens	Normal tax slab rates
194Q	Payments for the purchase of goods	50,00,000	0.10%
194R	Perquisite or benefit to a business or profession	20,000	10%
194S	TDS on the transfer of virtual digital assets	Specified Persons- 50,000 Others- 10,000	1%

Income Tax: What is Tax Collected at Source or TCS?

A tax collected by a seller or a service provider from the buyer at the time of sale of goods or provisions of services is TCS. It is applicable to certain goods and services such as alcohol, coal, toll plaza, etc.

It is applicable on amounts involved in the transaction more than Rs 2 lakhs. The TCS rate varies from 0.1 per cent to 10 per cent depending upon the type of goods or services.

Income Tax: TCS slab

Income Tax: TCS Vs TDS

Factors	TDS	TCS
Applicability	Applicable on sell of goods and services	Applicable to income
Liability	Deductor has to collect the tax	Seller has to collect tax on the sale of specified goods and services
Rate of taxation	Higher than TCS	Lower than TDS
Tax Payment	Amount is deducted from the payer’s account before payment and deposited with the government	Amount collected is paid directly to the governemnt
Filing Return	No filling required	Filing as per Income Tax Act
Return on excess tax paid	excess amount can be claimed as a refund	excess amount cannot be refunded

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