TDS vs TCS under Income Tax - The tax collection system

Table of Contents

TDS vs TCS Introduction

The tax imposed upon the income of a Person is called Income Tax. Income Tax, a two worded term comes from the word Income and Tax. The government collects a revenue from the public to run the country in the form of tax. On the other hand, income is the earning done in a particular course of time. The income can be stable and unstable as well. Thus, Income Tax is the tax paid on Net Taxable Income. TDS and TCS are two most significant type of taxes under Income Tax collected by the government. Thus, TDS and TCS are the modes of tax collection at the time of generation of income. These taxes are imposed only on the Person who has an income. One transaction can either have TCS or TDS. Not both of them. In this article, we talk about TDS vs TCS. That is, the key points of TDS and TCS.

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What is TDS?

TDS stands for Tax Deducted at Source. Therefore, it is the tax on the income of a Person. The deduction of tax takes place at the source of income. Hence, it is the system of collection of tax before the income reaches the hand of the income recipient. Since, the government holds the service receiver accountable for the tax payment. Thus, it can be said that it is a short and simpler method of tax collection for the government. Also, the government of India has different rates for taxation for different services. And, it is a direct method to collect taxes from the service receiver.

Also, it is mandatory to pay and file a TDS Return after crossing a certain benchmark. It is declared by the government. Violation leads to issue of notice by Income Tax Department. In the name of the service receiver. And, legal action takes place. Furthermore, the Deductor issues a Certificate of TDS to ensure the payment.

What is TCS?

TCS stands for Tax Collected at Source. Therefore, it is the tax imposed on the payment given by a receiver. The collection of tax takes place at the destination of income. Hence, it is the system of collection of tax after the income reaches an income recipient. Since, the government holds the service provider accountable for the tax payment. The government of India has different rates for taxation for different services. Also, it is a direct method to collect taxes from the service receiver. It is mandatory to pay and file a TCS Return. Further, there are certain situations / scenarios that require TCS collection. Everyone in those situations has to pay TCS. Violation leads to issue of notice by Income Tax Department. In the name of the service provider. And, legal action takes place. The Collector issues a TCS Certificate as a proof of payment.

TDS vs TCS – The Key Differences.

S.no.	TDS	TCS
1.	Tax Deducted at Source.	Tax Collected at Source.
2.	Service receiver deducts it.	Service provider collects it.
3.	Receiver is called Deductor. And provider a Deducctee.	Provider is called Collector. And receiver a Collected.
4.	A TDS Certificate is issued.	A TCS Certificate is issued.
5.	Deductor issues the above certificate.	Collector issues the above certificate.
6.	Section 192-196 of Income Tax governs TDS.	Section 206 C of Income Tax Act governs TCS.
7.	For example, All Professional services have TDS imposed upon them.	For example, Sale of motorcycles over Rs. 10 lakhs have TCS upon them.

Summary.

TDS vs TCS – TDS and TCS are vice-versa of each other. Also, a subtype of Income Tax. TDS has been in practice since a long time at a large scale. While, TCS has come into large-scale practice recently. Both the taxes have certificates in their name. But, for different parties. Specifically, the government holds responsible the persons for the taxation of each other. So, this kind of transaction is introduced. It is compulsory to file TDS and TCS. Both the taxation processes need payment. And one needs to file the Returns within the due dates. In the Financial Year the payment and returns are filed. Also, the payments have different rate charts. Thus, make sure to check for the updated rate chart.

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