To produce money for the nation, the Indian government charges both direct and indirect taxes. Direct taxes are collected on personal and business income, while indirect taxes are charged on the sale of products and services.
While, some taxes look similar like TDS and TCS. However, There is a big difference between TDS and TCS. Let’s Understand both of them in detail.
Table of Contents
Difference Between TDS and TCS
TDS is a tax that is implemented on a firm’s payment to a consumer if the amount exceeds a particular threshold. TCS is a tax that sellers collect when they sell something to a customer.
TCS is deducted from the sale of certain products, such as lumber, waste, natural wood, and etc. Whereas TDS is deducted from payments such as salary, rent, professional fees, brokerage fees, and commissions.
What is TDS?
The full term of TDS is ‘tax deducted at source,’ and as the name implies, it is an indirect method of obtaining tax in which money is collected directly from the recipient’s income.
TDS is based on the principles of “pay as you earn” and “collecting when it is earned,” which means that tax collection is accelerated.
According to the Income Tax Act of 1961, any payment on certain costs that are subject to TDS must be made after a specified percentage has been deducted.
Example
Assume Mr. A is employed by a firm. Before making him the final payment, his employer deducts the relevant tax rate from his monthly compensation. TDS is the amount that is collected in this way.
What is TCS?
In India, a tax is charged by the firm or at defined rates from the buyer or payer of the designated category of products on the sale of particular items. Tax collected at source, or TCS, is the term for this.
The seller then pays the government the tax received from the buyer and provides a TCS certificate, which the buyer of such items would receive credit for.
Tendu leaves, scrap, parking lot, jewels, booze, toll plaza, bullion, and other goods are among these. For various goods, the TCS calculation rate is varied.
TCS Example
Mr. B is now working as a mineral wood merchant. Mr. C buys some mineral wood from him. Mr.B takes a 5% tax from the buyer when making the sale; this amount is referred to as TCS.
TDS VS TCS
Here are the major diffrence between TCS and TDS:
| Basis | TDS | TCS |
| Meaning | When a company or a person makes a payment that exceeds a certain threshold, TDS tax is collected. | When a vendor sells products to a buyer, they must pay a TCS tax. |
| Deductions on | TDS are deducted from payments such as salary, rent, brokerage, specialist fees, reward, and interest, among others. | TCS charges are made on the sale of waste, lumber, natural wood, tendu leaves, and other similar items. |
| Criteria | On payments in excess of a certain amount. | On the selling of specific products (barring those used for manufacturing or production) |
| Act | The Income Tax Act of 1961 allows a person making a defined payment over and above a particular amount to deduct TDS. | According to the Income Tax Act of 1961, a person selling certain products can charge TCS. |
| Nature | TDS is an expense | TCS is an income |
TDS Tax rates
| Payment Type | TDS |
| wages | According to the applicable income tax slab |
| Winnings of INR 10,000 or more in the lottery, crossword puzzle, or horse racing | 30 percent |
| A contractor may receive a single payment of INR 30,000 or an aggregate payment of INR 1 lakh. | 1 percent for individual and HUF, while 2 percent for others |
| Over INR 15,000 in lottery ticket commissions or brokerage fees | 5 Percent |
| Property, building, plant, or machinery rental in excess of INR 2,40,000 | 10 Percent for Property & building, 2 percent for plant & machinery |
| Purchase of a property worth more than INR 50 lakhs | 1 Percent |
TCS rates
| Goods | TCS |
| Alcohol or liquor | 1 Percent |
| Timber wood under a leased forest | 2.5% Percent |
| Tendu leaves | 5% Percent |
| Forest produce except tendu leaves and timber | 2.5% Percent |
| Scrap or Wastage | 1 Percent |
| Metals such as lignite, coal, iron ore | 1 Percent |
| Buying of motor vehicle above INR 10 lakh | 1 Percent |
| Mine, quarry, parking lot & toll plaza | 1 Percent |
Legal Actions for not filing TDS and TCS
If a person fails to deposit or collect taxes, he or she will be subjected to legal action. This comprises a penalty equivalent to the amount of tax that has not been collected or deducted.
The person might possibly face a sentence of 3 to 7 years in jail and a fine, depending on the circumstances. In the case that TDS or TCS is not deposited, interest may be charged.
On the monthly tax amount that was entitled for deductions, interest must be paid. In the event of tax deducted at source, interest is computed for each month from the day tax became available for deductions to the date it is ultimately deducted (1%) or paid (1.5%) to the government.
The interest rate on TCS’s borrowing stays at 1%.
Conclusion
Keeping track of all of your taxes is critical. If TDS has been collected from your earnings, you may be eligible for a refund if you file your taxes on time. Consider how much money you’d lose on every transaction if you didn’t file returns.
This is all from our side difference between tcs and tds. Let us know your views about tds and tcs difference in the comment section.
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Difference Between TDS and TCS in Hindi?
टीडीएस एक ऐसा कर है जो एक फर्म द्वारा उपभोक्ता को भुगतान पर लागू किया जाता है यदि राशि एक विशेष सीमा से अधिक हो जाती है। टीसीएस एक ऐसा कर है जो विक्रेता किसी ग्राहक को कुछ बेचने पर वसूल करते हैं। TCS की कटौती कुछ उत्पादों, जैसे लकड़ी, अपशिष्ट, प्राकृतिक लकड़ी, और आदि की बिक्री से की जाती है, जबकि TDS वेतन, किराया, पेशेवर शुल्क, ब्रोकरेज शुल्क और कमीशन जैसे भुगतानों से काटा जाता है।
TCS meaning?
In India, a tax is charged by the firm or at defined rates from the buyer or payer of the designated category of products on the sale of particular items. Tax collected at source, or TCS, is the term for this.
TDS meaning?
The full term of TDS is tax deducted at source, and as the name implies, it is an indirect method of obtaining tax in which money is collected directly from the recipient's income. TDS is based on the principles of pay as you earn and collecting when it is earned, which means that tax collection is accelerated.
TCS full form?
The full form TCS is Tax Collected at Source as per the Indian government law.
What is TCS Tax in Hindi?
भारत में, विशेष वस्तुओं की बिक्री पर फर्म द्वारा या उत्पादों की निर्दिष्ट श्रेणी के खरीदार या भुगतानकर्ता से परिभाषित दरों पर कर लगाया जाता है। स्रोत पर एकत्रित कर, या टीसीएस, इसके लिए शब्द है। विक्रेता तब सरकार को खरीदार से प्राप्त कर का भुगतान करता है और एक टीसीएस प्रमाणपत्र प्रदान करता है, जिसके लिए ऐसी वस्तुओं के खरीदार को क्रेडिट प्राप्त होगा।
