Difference between TDS and TCS – A Complete Guide

10 Dec 2024

By: BlinkX Research Team

The Indian Government broadly collects two types of taxes direct and indirect taxes. Direct taxes are collected from individuals on their earned income. Whereas, the indirect tax is collected by the seller. Taxes Deducted at Sources (TDS) and Taxes Collected at Sources (TCS) are two types of indirect taxes. These terms are often mixed interchangeably. In 2017, the Government of India introduced GST (Goods and Service Tax) on goods and services to simplify indirect taxes. Let us dive deep into understanding the difference between TCS and TDS in detail.

What is TDS

Tax Deducted at Source is a type of tax that a business or individual must deduct from the payment made for the purchase of goods and services. According to section 194Q of the Income Tax Act, TDS is deducted if the payment exceeds ₹50 lakh for the purchase of goods and services like rent, consulting, legal fees, royalty, technical services, etc.

The taxpayer can claim the TDS while filing an income tax return. The TDS rate might differ depending on the factors like kind of income, taxpayer, and place of residence. The central government tracks income using the TDS as the taxes are collected in advance.

Table of Content

What is TDS
TDS Rate Chart FY 2024-25 (AY 2025-26)
Example of TDS
What is TCS
TCS Rate Chart FY 2024-25 (AY 2025-26)
Example of TCS
Difference between TCS and TDS
Penalties for Not Filing TDS/TCS on Time
TDS and TCS under GST

TDS Rate Chart FY 2024-25 (AY 2025-26)

Collection codes under section 206C

Section	Nature of Payment	Threshold	Individual/ HUF (%)	Other (%)
192	Salaries	-	Slab Rate	Slab Rate
192A	Premature withdrawal from EPF	50000	10	-
193	Interest on Securities	10000	10	10
194	Dividends	5000	10	10
194A	Interest (Banks)	40000	10	10
194A	Interest - Senior Citizen (Banks)	50000	10	-
194A	Interest (Others)	5000	10	10
194B	Winning from Lotteries	10000	30	30
194BA	Winnings from online games	-	30	30
194BB	Winning from Horse Race	10000	30	30
194C	Contractor - Single Transaction	30000	1	2
194C	Contractor - During the F.Y.	1 Lakh	1	2
194C	Transporter (44AE) declaration with PAN	-	-	-
194D	Insurance Commission (15G - 15H allowed)	15000	5	10
194DA	Payment received - Life insurance Policy From: 01/10/2024 Upto: 30/09/2024	1 Lakh	2 5	2 5
194EE	Payment received - National Savings Scheme (NSS)	2500	10	10
194F	Repurchase Units by MFs (Upto 30/09/2024 - 20% TDS)	-	-	-
194G	Commission – Lottery From: 01/10/2024 Upto: 30/09/2024	15000	2 5	2 5
194H	Commission / Brokerage From: 01/10/2024 Upto: 30/09/2024	15000	2 5	2 5
194I(a)	Rent for Plant & Machinery	2.40 Lakh	2	2
194I(b)	Rent for Land, Building & Furniture	2.40 Lakh	10	10
194IA	Transfer of certain immovable property other than agriculture land	50 Lakh	1	1
194IB	Rent payment by individual / HUF not covered u/s 194I From 01/10/2024 Upto: 30/09/2024	50000 P. M.	2 5	2 5
194IC	Payment under sthe pecified Joint Development Agreement	-	10	10
194J(a)	Fees - Technical Services, Call Centre, Royalty, Distribution / Exhibition of Cinematographic Films, etc.	30000	2	2
194J(b)	Fees - All other Professional Services	30000	10	10
194K	Payment of dividends by mutual Funds	5000	10	10
194LA	Compensation on transfer of certain immovable property other than agricultural land	2.50 Lakh	10	10
194LB	Income by way of interest from infrastructure debt fund (non-resident)	-	5	5
194LBA	Certain income from units of a business trust (applicable from 01.10.2014)	-	10	10
194LBB	Income in respect of investment of investment fund	-	10% for residents, 30% for non-residents	10% for residents, 40% for non-residents
194LBC	Income in respect of investment in securitization trust	-	30% for residents, 40% for non-residents, 25% for individual & HUF	30%, residents, 40% for non-residents, 25% for individual & HUF
194LD	Interest on certain bonds and Govt. Securities (from 01.06.2013)	-	5	5
194M	Payment made for Contracts, Brokerage, or Professional Fees by individual & HUF (other than Section 194C, 194H & 194J) From 01/10/2024 Upto: 30/09/2024	50 Lakh	2 5	2 5
194N	Cash withdrawal above 1 crore during the previous year from1 or more accounts with a bank or co-operative society (wef 01.09.2019)	1 Crore (Rs. 3 Crores if withdrawal is by Co-operative society) 20 Lakhs (If ITR not filed for previous 3 years)	2 2 (Rs. 20 Lakh - 1 Crore) 5 (Rs. 1 Crore and above)	2 2 5
194O	TDS on e-commerce participants From: 01/10/2024 Upto: 30/09/2024	5 Lakh	0.1 1	0.1 1
194P	TDS in case of Specified Senior Citizen (above 75 years) having Salary & Interest (ITR not required)	-	Slab Rate	NA
194Q	TDS on Purchase of Goods exceeding Rs. 50 Lakhs (Applicable From 01-July-2021)	Above Rs. 50 Lakhs	0.1	0.1
194R	Benefits or perquisites of business or profession	20000	10	10
194S	Payment of consideration for transfer of virtual digital assets by persons other than specified persons	10000	1	1

Source: www.tdsman.com

Example of TDS

Suppose an employee working for a company with a monthly salary of ₹50,000. The company will deduct TDS from the salary before making payment to the employee as per the income tax regulations.

Let’s assume that 10% is the applicable TDS rate for the income slab. In this case, the employer will deduct 10% of the employee's salary as TDS amount to ₹5,000 (10% of ₹50,000). You will receive the amount of ₹45,000 after deducting TDS.

What is TCS

Tax Collected at source or TCS rate is applicable on the goods and services as per section 206C of the Income Tax Act, 1961. TCS applies to the seller on the sale of the goods collected from the buyer on the sale of goods more than ₹50 Lakhs.

TCS Rate Chart FY 2024-25 (AY 2025-26)

Collection codes under section 206C

Code	Nature of Payment	TCS Rate (%)
A	Alcoholic Liquor for human consumption & Tendu leaves	1
B	Timber obtained under a forest lease or other mode	2.5
C	Timber obtained under any other mode other than forest lease	2.5
D	Any other forest produce not being a timber or tendu leaves	2.5
E	Scrap	1
F	Parking Lot	2
G	Toll Plaza	2
H	Mining and Quarring	2
I	Tendu Leaves	5
J	Minerals	1
K	Bullion & Jewellery	1
L	Sale of Motor Vehicle (From 01/01/2025, more luxury items may be notified in addition to Motor Car)	1
M	Sale in cash of any goods (other than bullion)	1
N	Providing of any service (other than Ch-XVII-B)	1
O	Tour Program Package	5
P	LRS - Educational Loan - Financial Institution	0.5
Q	LRS - Other purposes - Liberalized Remittance Scheme	5
R	Sale of Goods	0.1
T	LRS – Education or Medical Treatment not covered under Code P	5

Source: www.tdsman.com

Example of TCS

Suppose a business sells alcoholic beverages. As per the applicable tax regulations, TCS is collected by the seller when alcoholic liquor is sold.

Let's say the seller sells a case of alcoholic liquor to a customer for ₹ 10,000 and the TCS rate for alcoholic liquor is 1%. In this case, the seller will collect 1% of the sale value, which amounts to ₹100 (1% of ₹10,000) as TCS.

As per the specified timeline and procedures, the seller will remit the collected TCS amount of ₹100 to the government.

Difference between TCS and TDS

Key Differences	TDS	TCS
Meaning	TDS is deducted from the payment made for purchasing of goods and services.	Tax Collected at Source (TCS) is collected by the seller on the sale of goods to the buyer.
Transaction	Rent, commission, interest, rent, salaries, brokerage and more	Sale of minerals, liquor, toll tickets, timber, scrap, forest products, cars, tendu leaves, etc.
Deduction	TDS is deducted whenever a payment is due or made, whichever is earlier.	TCS is collected at the time of sale by the seller.
Due Dates	7th of next month, except for March, is the 30th of April of the next Financial Year.	7th of next month, except for March, is the 7th of April of the next Financial Year. The returns have to be submitted quarterly.
Limits	TDS is applicable on the purchase of goods if the amount is more than 50 lakhs under section 194Q	TCS is applicable on the sales of goods if the amount is more than 50 lakhs under section 206C.

Penalties for Not Filing TDS/TCS on Time

Section

Nature of Non-Compliance

Penalty

Under Section 271H

Failed to submit TDS/TCS return on time and accurately

Minimum ₹10,000

Maximum up to ₹100000

For non-deduction of TDS, an interest rate of 1.5% per month is applicable from the date on which tax was deductible to the date on which tax is deducted under section 201 (1A).
For late TDS payments, the interest rate of 1.5% will apply from the deduction date to the payment date.

TDS and TCS under GST

Below is the overview of TDS and TCS under GST:

TDS (Tax Deducted at Source) under GST

Generally, the TDS rate is 2% (1% each for Central GST and State/Union Territory GST). TDS under GST applies to specified local authorities, government departments, and certain categories of taxpayers. A certain percentage is deducted from the invoice value while making payments to suppliers registered under GST. Providing details of the deducted tax and the supplier, the TDS return is filed by the deductor. The supplier can utilize the TDS amount for offsetting their GST liability which is credited to their electronic cash ledger.

TCS (Tax Collected at Source) under GST

TCS is collected at the time of collection/payment from the buyers and applies to e-commerce operators who facilitate the supply of goods or services through their platforms. The rate of TCS varies based on the nature of the supplies. The E-commerce operator collected the TCS at the time of receiving payment from the buyer. Providing details of the collected tax and the buyer, TCS is collected by the e-commerce operator. The buyer can utilize the TCS amount to pay their GST liability which is credited to their electronic cash ledger.