Tds vs tcs

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rishabh

rishabh (Querist)
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09 July 2015 what is the difference between TDS and tcs. Plz explain With an example.

CMA Gul S

CMA Gul S (Expert)
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09 July 2015 Hi Rishabh -

here are the details:

1....
TDS happens while making a payment — it is a deduction from the recipient's income. To wit, TDS from salary. TCS happens in a diametrically opposite situation.

Under Section 206C, a seller of scrap is required to collect tax at the rate of 1 per cent of the selling price.

While TDS pares down one's receipts, TCS heightens one's purchase bill. While TDS is normally resorted to expedite tax collection and foil tax evasion, the aim of TCS is to bring into the tax net the hard-to-tax categories.

Both, however, abate against the actual tax liability.

2.....
TDS is actually a deduction while TCS is a collection of tax at source, meaning thereby, if X makes payment of Rs. 100 to Y and such payment is covered under the provisions of tds, then X will have to deduct tds say Rs. 10 and then will make payment of Rs. 90 to Y.
While, if X sells goods worth Rs. 100 to Y and such goods are covered under the provisions of tcs, then X will collect Rs. 10 more from Y and hence the sale will be for Rs. 110.
In both the cases Rs. 10 will be deposited to govt. account.
Hope it will clarify the provision a little clear.