TDS

What is TDS?

For a speedy and efficient collection of taxes, the Income Tax Law has integrated a system of deduction of tax at the time of generation of income. This system is known as “Tax Deducted at Source”, generally called TDS. Under this mechanism, tax is deducted at the point of origination of income. The payer deducts tax, and the same is directly remitted to the Government by the payer on behalf of the payee. The concept of TDS was introduced to combat and reduce tax evasion.

The provisions of tax deducted at source currently apply to several payments like salary, interest, commission, brokerage, professional fees, royalty, etc.​The recipients of such income can claim an Income Tax TDS refund of the excess tax paid by them in the form of TDS at the time of filing their ITR if their tax deducted is more than the required amount.

TCS

What is TCS?

The tax collected at source, abbreviated as TCS, is another means of collecting tax at the very source of income by the Government. Under the TCS provisions, certain specified transactions require the seller to collect an additional amount as tax at the time of sale over and above the sale price and remit the same to the Central Government.

As per the TCS provisions of the Income Tax Act 1961, certain persons, being the sellers, must collect a specified percentage of tax at the time of debiting the amount payable by the purchaser to the account of the purchaser or at the time of receipt of the amount from the purchaser, whichever is earlier.

The person collecting tax has to obtain a Tax Collection Account Number and quote it in all challans, certificates and returns, and other documents pertaining to the transactions.

E-TCS and E-TDS Return Filing

As per Section 206 of the Income Tax Act, all corporate and government deductors are compulsorily required to file their NSDL TDS returns electronically (e-TDS returns). However, for other deductors, TDS e return filing is optional. Hence, the other deductors have an option to go for TDS return filing online(i.e., TDS e filing) or file it in physical form.

Similarly, in the case of TCS also, it is mandatory for corporate and government collectors to file their TCS returns in electronic form (e-TCS return). However, for other collectors (collectors other than Government and corporates), online TCS return filing is not mandatory, and they have an option to file it electronically or in physical mode.

One can file TDS and TCS returns online using a TDS TCS return filing software also.

Penalty for Late Filing of TCS Return and TDS Return

Every person liable to fulfil the TDS return filing process or TCS return filing procedure must comply with all the provisions of TDS and TCS quarterly return filing because if he fails in furnishing the TDS TCS returns, he shall be required to pay a penalty of a sum of two hundred rupees for every day during which the default continues.

However, such a fee cannot exceed the amount of TDS or TCS, as the case may be, for which the return is being furnished.

So, the taxpayers must make sure that they comply with all the provisions of TCS and TDS filing, like furnishing Form 26Q TDS or Form 27Q TDS or Form 27EQ before the applicable TDS and TCS return last dates to avoid any TCS/TDS late return filing penalty.