TCS and TDS are two of the most commonly used words when we talk about taxation. In the field of tax, TDS stands for Tax Deducted at Source while TCS stands for Tax Collected at Source. When they sound almost identical, you must be wondering how they actually differ. Also, when the Government works on a self-assessment model of tax, why do TDS and TCS come into play?

In this content, we have tried putting light on some of the important aspects of TDS and TCS. So, let us walk through the same to answer the above questions.

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.