TDS vs TCS Explained: Let us tell you that both TDS and TCS are such taxes which the government collects at the time of income or purchase. In TDS, the tax deductor is making the payment, while in TCS, the tax collector is selling a thing or service.
Many of us pay tax, but most people do not know the meaning of words like TDS and TCS. Both are such taxes which are deducted directly from your income or at the time of any big purchase. The place and method of application of these two taxes is different. To understand the tax system better, it is important to understand the difference between TDS and TCS. Here we are going to tell in detail about the difference between these two…
What is TDS?
TDS (Tax Deducted at Source) means that tax is deducted on your salary or any kind of income in advance. This tax is levied at the time of payment. The responsibility of deducting TDS lies with the payer i.e. the company, institution or person who is making the payment to you. This tax is implemented under section 192 of the Income Tax Act and it has to be deposited by the 7th of every month.
What is Tax Collected at Source (TCS)?
TCS (Tax Collected at Source) means when you buy a big thing or go on a foreign trip, then tax is levied on it. TCS is collected by the person who is selling the goods or services. Such as showroom, tour operator or dealer. This tax is also collected at the time of payment and comes under section 206C. It has to be deposited to the government within seven days of the last day of every month.
Difference between TDS and TCS
TDS and TCS are both such taxes which the government collects at the time of income or purchase, but the process and implementation conditions of both of these are different.
TDS i.e. Tax Deducted at Source is levied when a person or organization is making payment to someone such as salary, rent, interest or any professional fee. In this, the tax is deducted by the person who is making the payment, and this tax is deposited directly to the government. TDS usually applies to income like salary, rent, bank interest or freelance fees. It is implemented under section 192 of the Income Tax Act and has to be deposited by the 7th of every month.
TCS i.e. Tax Collected at Source is taken when a person is selling any goods or services like a car showroom, tour operator or merchant. In this, the seller takes tax from the customer on the amount above the prescribed limit and then deposits it to the government. The process of TCS comes under section 206C of the Income Tax Act and it has to be deposited within 7 days after the last day of every month.
Thus, in TDS, the person who deducts tax is making the payment, while in TCS, the person who collects tax is selling a good or service. One applies to income and the other to purchases.
Can you claim a refund of TDS?
If TDS has been deducted more than the tax due on your total income, then you can claim a refund. For example, if your salary falls within the tax free limit but your employer has deducted TDS, then you can get your money back by filing ITR. Not only this, if there is a delay in the refund, then the Income Tax Department also gives you 6% annual interest on that amount.
Now that you know the difference between TDS and TCS, keep these rules in mind the next time you make any transaction.
