TDS & TCS Applicability and Procedures
Helping You Stay Compliant and Efficient with Tax Deduction and Collection Provisions
What is the Difference between TDS and TCS?
| TDS (Tax Deducted at Source) | TCS (Tax Collected at Source) |
|---|---|
| Tax deducted by the payer before making certain payments. | Tax collected by the seller from the buyer at the time of sale. |
| Applies to expenditures and payments (like salary, interest, fees, etc.). | Applies to sale of specified goods or services (like liquor, scrap, motor vehicles, etc.). |
| Deducted by individuals, firms, companies, government, etc. | Collected by specified sellers such as dealers, exporters, tour operators, etc. |
| Must be deposited monthly with the government. | Must be deposited monthly with the government. |
TDS Applicability Summary
TDS is applicable on certain types of payments when they exceed specified monetary limits. The responsibility lies with the payer to deduct and remit it to the government.
| Section | Nature of Payment | Threshold Limit | Rate |
|---|---|---|---|
| 192 | Salary | As per slab rates | Slab rate |
| 194A | Interest (Bank/Others) | ₹40,000 (₹50,000 for senior citizens) | 10% |
| 194C | Contractor Payments | ₹30,000 per contract or ₹1,00,000 per annum | 1% (Individual/HUF), 2% (Others) |
| 194H | Commission/Brokerage | ₹15,000 | 5% |
| 194I | Rent (Land/Building) | ₹2.4 lakh/year | 10% |
| 194J | Professional/Technical Fees | ₹30,000 | 10% |
| 194Q | Purchase of Goods | ₹50 lakh per buyer | 0.1% |
| 195 | Payments to Non-residents | No threshold | As per DTAA or IT Act |
Important: If PAN is not provided, TDS is deducted at 20% under Section 206AA.
TCS Applicability Summary
TCS is collected by sellers at the time of receiving payment or at the time of sale of certain prescribed goods or services.
| Section | Goods/Transactions | Threshold Limit | Rate |
|---|---|---|---|
| 206C(1) | Alcoholic liquor, timber, scrap, etc | No threshold | 1% or as notified |
| 206C(1F) | Sale of motor vehicle exceeding ₹10 lakh | ₹10 lakh | 1% |
| 206C(1H) | Sale of goods (Seller TO > ₹10 Cr) | Sales > ₹50 lakh per buyer | 0.1% |
| 206C(1G) | Foreign remittance under LRS / Overseas Tour Packages | > ₹7 lakh | 5% (20% if no PAN under LRS) |
Who is Required to Deduct or Collect?
| TDS Deductors | TCS Collectors |
|---|---|
| Employers paying salaries | Sellers of notified goods |
| Companies making specified payments | Dealers selling motor vehicles |
| Government departments | Tour operators handling overseas packages |
| Purchasers of goods (Sec 194Q) | Exporters/remitters under LRS |
| Individuals/HUF subject to audit | Sellers under Sec 206C(1H) |
Exemptions and Special Provisions
- Non-Audit Individuals/HUF are not required to deduct TDS (except under Sections 194-IA, IB, and M).
- Form 15G / 15H can be submitted by eligible payees to avoid TDS deduction.
- Form 13 can be used to obtain a certificate for lower or nil deduction.
- Exports are exempt from TCS.
- Certain government transactions and payments to specified institutions are also exempt.
Consequences of Non-Compliance
| Default | Implications |
|---|---|
| Failure to deduct/collect TDS/TCS | Treated as "assesse in default", liable for interest and penalty |
| Delay in depositing TDS/TCS | Interest @ 1% (TDS) / 1.5% (TCS) per month or part thereof |
| Late return filing | ₹200/day late fee under Section 234E |
| Incorrect filing / default | Penalty between ₹10,000 to ₹1,00,000 (Sec 271H) |
TDS & TCS Return Filing Forms
| Category | Form | Frequency |
|---|---|---|
| TDS on Salary | Form 24Q | Quarterly |
| TDS on Non-Salary Payments | Form 26Q | Quarterly |
| TDS on Payments to Non-Residents | Form 27Q | Quarterly |
| TCS Returns | Form 27EQ | Quarterly |
Our TDS/TCS Services Include:
At VETRI AUDIT SERVICES PRIVATE LIMITED, we assist clients with:
- Determining applicability of TDS/TCS for your transactions.
- PAN verification and rate application
- Deduction/collection at correct rates and on time.
- Timely filing of TDS/TCS returns.
- Assistance with correction of defaults, notices, or lower deduction certificates.
- Advisory on exemptions and legal compliance
Ensure Accuracy. Avoid Penalties. Stay Compliant.
Let us handle your TDS & TCS obligations with precision and expertise.
Contact us today for a consultation!
