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Difference between TDS and TCS

Difference between TDS and TCS

In income tax, the beneficiary's total income for the previous year is taxable in the valuation year. Although there are some provisions in the act, through which, the recovery of income taxes, possible in the previous year itself, namely through TDS, TCS, and the payment of prepaid taxes. If you are unable to distinguish between TDS and TCS, you are not alone. While TDS is an expense, TCS is an income.

TDS synonymous of tax deduction at source, TCS yes expands to collection of taxes at source. These are not taxes but are an obligation, which is deducted at the time of payment or received more and deposited with the Income Tax Office. To help you by comparing and contrasting these taxes in detail, we have compiled an article for you, take a look.

Comparative chart

Basis for comparison TDSTCS
Sense TDS implies the amount deducted from the recipient's income in the form of tax. TCS refers to a sum accumulated by the seller or company as a tax.
Nature expenses Income
imposition The specified expenses exceed the prescribed limit. The sale of specified items made.
Responsible person Deducted by the payer or the buyer Collected by the beneficiary or the seller
event Credit to the payee's account or during payment, whatever the precedent. Debit on the buyer's account or during receipt, whichever comes first.

Definition of TDS

Tax deducted at source or TDS, as the name suggests, an indirect way of collecting the tax, in which the collection of revenue to the recipient's income. It integrates the notion of "pay as you earn" and "is collected when it is earned", following which the collection of taxes is anticipated. Under the Income Tax Law, any payment on certain expenses, which falls within the scope of TDS, must be paid after the specified percentage has been deducted.

In short, at the time of payment, the payer retained a certain percentage of the amount and deposited it with the government. In this way, the income tax is charged in advance rather than at a later date and the recipient gets the net amount, ie after TDS. Some examples of expenses for which TDS is charged are salary, random income, interest on securities, payment of rent, payment of commissions, payment of commissions or brokerages and so on.

Definition of TCS

In India, on the sale of certain items, a tax is levied by the seller or company at prices set by the payer or buyer of the specified category of items, called Source Tax or TCS. The seller then transfers the taxes collected by the buyer to the government and issues a TCS certificate, for which the buyer of these goods will receive credit.

Such items include tendu leaves, liquor (alcoholic nature), scrap, parking, toll plaza, bullion (over two lakhs), jewelry (over five lakhs) and so on. The different TCS rate for different items.

Key differences between TDS and TCS

The difference between TDS and TCS can be clearly traced for the following reasons:

  1. TDS implies the amount deducted from the recipient's income in the form of tax. TCS refers to a sum accumulated by the seller or company as a tax.
  2. While TDS as corporate spending, TCS income.
  3. The withholding tax deduction must be paid when the specified expenses exceed the prescribed limit. On the contrary, the collection of taxes at source must be collected at the time of sale of the specified items.
  4. The payer or buyer deducts TDS, i.e. they are required to deduct taxes at source. Conversely, the beneficiary (recipient) or the seller responsible for the collection of TCS, at a rate prescribed by the buyer.
  5. In general, the tax is deducted at the source, when credited to the beneficiary's account or during the payment, whichever is the precedent. Although, in the event of payment of salary and life insurance premium, it should be deducted at the time of payment only. Unlike TCS, which is collected when the buyer's account is charged or when the amount that occurs first is received. However, when selling jewelry or bullion, it should be collected when the item is received in cash.

Conclusion

The withholding tax deduction (TDS) occurs at the time of payment, ie a deduction from the recipient's income. On the other hand, the collection of taxes at source absolutely opposite to that of TDS.