One of the most crucial components of financial planning is Income Tax. To save tax, you must maintain track of your income and investments and strategically plan to purchase life insurance, a term plan, or any other tax-saving investment. The Income Tax is not the government’s only source of revenue. It also collects indirect taxes from us, such as Tax Deduction at Source (TDS), Tax Collected at Sources (TCS), and Goods and Service Tax (GST), via levies on products, services, and transactions. Payments for direct taxes are made by those who earn the money. In the case of indirect taxes, it is the seller’s obligation to deposit the tax with the government. TDS and TCS are two indirect taxes that are commonly mistaken with one another. In this article we’ll discuss about TDS and TCS Concept in India for AY 2022-23 – FY 2021-22.
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Concept of Tax Deduction at Source
TDS is an abbreviation for Tax Deducted at Source. According to Section 194 Q, the Income Tax Department requires any company or individual to deduct tax at the source if the payment for goods and services exceeds Rs. 50 lakhs, such as rent, consultation, legal fees, royalties, technical services, and so on. The TDS rates are run by the government in accordance with the Income Tax Act, 1961.
In every TDS transaction, the company or individual deducting TDS from the payment is referred to as the deductor, while the company or individual receiving the payment is referred to as the deductee.
Concept of Tax Collected at Source
TCS, or Tax Collected at Source, is a levy on products by the seller and collected from the customer at the moment of sale. Further, Section 206 C of the Income Tax Act, 1961 lists the items and services that are subject to TCS. Moreover, TCS on the sale of goods has a threshold of Rs. 50 lakhs.
Difference between TDS and TCS
TDS and TCS are both levied at the place of origin of income/ payment; however there are some notable differences between them. Continue reading to learn the distinction between TDS and TCS.
| Elements | TAX DEDUCTED AT SOURCE | TAX COLLECTED AT SOURCE |
| Meaning | TDS is tax deducted at the source of payment by any company or individual if the payment exceeds the thresholds specified in the different sections. | TCS is a tax that the seller collects at the moment of sale. |
| Transaction Covered | TDS is levied on interest, salary, brokerage, professional fees, commission, products purchased, rent, and so on. | TCS is levied on the sale of lumber, scrap, minerals, liquor, tendu leaves, forest produce, automobiles, and toll tickets. |
| Limits | TDS is levied on purchases of commodities that exceed Rs. 50 lakhs under Section 194Q. | TCS is levied on the sale of products if the value exceeds Rs. 50 lakhs, according to Section 206C (1) (H). |
| Rates | For purchases of products, the tax deduction rate (TDS) is 0.1 percent of the amount exceeding Rs. 50 lakhs. | For the sale of products, the tax collection rate (TCS) is 0.1 percent of the selling amount exceeding Rs. 50 lakhs. |
| Collection | TDS is deducted when a payment is due or paid, whichever occurs first. | TCS is collected at the moment of sale by the vendor. |
| Person Reason | The individual (or business) making the payment is responsible for deducting TDS. | TCS is to be collected by the person (or company) who sells the listed products. |
| Due Date | TDS deposits are due on the 7th of each month, while TDS returns are due quarterly. | TCS will be deducted in the month that the supply is made. It will be put to the government’s credit within 10 days after the end of the month of supply. |
| Filing of Quarterly Statement | TDS returns are submitted in three distinct ways: Form 24Q (on wages), Form 26Q (other than salaries), and Form 27Q. (Payments made to NRIs). | Form 27EQ contains a single quarterly return for tax collection at source (TCS). |
| Unavailability of PAN | According to Section 206 AA, persons who fail to submit a Permanent Account Number (PAN) to the person making the payment would be charged TDS at the higher of the following rates: The rate mentioned in the applicable Act section; 2. A rate of 20%. | Section 206CC requires anybody paying a sum payable to TCS to present their (PAN) to the person in charge of collecting the tax (hereinafter referred to as the collector); otherwise, the tax will be charged at the higher of the following rates: Twice the rate provided in this Act’s relevant provision; 2. A rate of 5% |
TDS and TCS Concept in India for AY 2022-23 – FY 2021-22
We have already gone through the concept of TDS and TCS and differences between them above. Now, let us come to the applicable respective rates for TDS and TCS for AY 2022- 23 – FY 2021- 22:
- Applicable TDS rates for AY 2022-23 – FY 2021-22
| Sections | Nature of Payment | Taxpayer | Limit | TDS Rate |
| 194 | Payment of Dividend | All Companies | Rs. 5000 | 10% |
| 194 A | Interest on loans/deposits from sources other than the bank | All companies/limited liability partnership businesses/partnership firms and individuals/Hindu undivided families with a net worth of less than Rs. 1 crore are eligible. | Rs. 5000 | 10% |
| 194 C | Payment paid to the contractor/subcontractor
Individual/Undivided Hindu Family Aside from the aforementioned |
All companies/limited liability partnership businesses/partnership firms and individuals/Hindu undivided families with a net worth of less than Rs. 1 crore are eligible. | A single payment of INR 30,000/- is required, and so is a cumulative payment of INR 1, 00,000/-. | 1 % for Hindu undivided families & 2% for others |
| 194 H | Brokerage or commission | All companies/limited liability partnership businesses/partnership firms and individuals/Hindu undivided families with a net worth of less than Rs. 1 crore are eligible. | Rs. 15000 | 5% |
| 194 I | Rent:
Plant & Machinery 194-I(a) Plant and machinery u/s 194-I (a) 194-I(b) Land, structure, furniture, or fixtures |
All companies/limited liability partnership businesses/partnership firms and individuals/Hindu undivided families with a net worth of less than Rs. 1 crore are eligible. | Rs. 240000 | 2.0 to 10.0 % |
| 194 IA | Payment paid in conjunction with the transfer of certain immovable property that is not agricultural land. | If the value exceeds INR 50 lakhs | Rs. 50 Lakhs | 1% |
| 194 J | Charges for Professional/Technical Services | All companies/limited liability partnership businesses/partnership firms and individuals/Hindu undivided families with a net worth of less than Rs. 1 crore are eligible. | Rs. 30000 | 2.0 to 10.0 % |
| 194 Q | Buyers starting on July 1, 2021 on purchases of goods | All Assessees have a turnover more than INR 10 Cr. And if His purchase of products or the cumulative worth of such purchases exceeds INR 50 lakh in the previous fiscal year. | 5 Lakhs to 50 Lakhs | 0.10% |
| 192 | Salary | All | – | According to the employee’s IT statement |
- Applicable TCS rates for AY 2022-23 – FY 2021-22
| Section | Section Name | Applicable To | TCS Rates |
| 206 C (1) (H) | Sale of Goods | All Assessees with a turnover more than Rs. 10 Cr. And if His sales of products or the cumulative amount of such sales to any buyer exceeded INR 50 lakh in the previous fiscal year. | 0.10% |
| 206 C (1) | Sale of any Scrap | All companies/limited liability partnership businesses/partnership firms and individuals/Hindu undivided families with a net worth of less than Rs. 1 crore are eligible. | 1% |
| 206 C (1) (F) | Motor Vehicle (any mode of payment) | Any Seller who accepts any payment for the sale of motor vehicles worth more than INR 10,00,000/- | 1% |
Penalties for Non-Compliance with TCS and TDS Filing
TDS and TCS Concept in India for AY 2022-23 – FY 2021-22 plays an important role as per Income Tax Act, 1961 and as per Section 271H, the deductor/collector may be punished if they fail to pay TDS on time and complete their TDS/TCS return appropriately. Further, for filing an inaccurate TDS/TCS return, the deductor/collector can be penalised a minimum of Rs. 10,000 and a maximum of Rs. 1, 00,000. In addition, Section 201(1A) of the Income Tax Act demands a monthly interest rate of @1.5 percent for non-deduction of TDS from the day tax was deductible until the date tax is deducted.
In the event of late TDS payments, the same 1.5 percent interest rate will be applied from the date of deduction until the payment date.
Endnote
It is critical that you keep track of all of your taxes. Further, if TDS has been deducted from your earnings, you may be eligible for a refund if you file your taxes on time. Moreover, you can consider how much money you’d lose on each transaction if you didn’t file returns. If you have collected TCS, it should be your responsibility to deposit the TCS with the authorities in order to ensure the smooth and legitimate operation of your business. As a personal entity, you can also save taxes by deducting life insurance, mutual funds, and other tax-saving devices.
