The Deduction and Collection of Tax at Source (TDS/TCS) provisions under the Income Tax Act, 1961 are covered under Chapter XVII (Sections 190 to 206CA). These provisions ensure advance tax collection by requiring specified persons (deductors/collectors) to withhold tax at the time of payment/credit (TDS) or collection (TCS).
Key Components of TDS & TCS:
(A) Applicability (Section 190)
- Tax is deducted/collected at source in addition to regular assessment.
- Ensures a steady revenue stream for the government.
(B) Deduction of Tax at Source (TDS) [Sections 192 to 206]
- Section 192: TDS on Salaries
- Section 193: TDS on Interest on Securities
- Section 194: TDS on Dividends
- Section 194A: TDS on Interest (other than securities)
- Section 194B: TDS on Winnings from Lottery/Puzzle
- Section 194C: TDS on Payments to Contractors
- Section 194H: TDS on Commission/Brokerage
- Section 194-I: TDS on Rent
- Section 194J: TDS on Professional/Technical Fees
- Section 194N: TDS on Cash Withdrawals (above specified limits)
- Section 194Q: TDS on Purchase of Goods (if payment > ₹50 lakhs)
- Section 195: TDS on Payments to Non-Residents
(C) Collection of Tax at Source (TCS) [Sections 206C to 206CA]
- Section 206C(1): TCS on Sale of Scrap, Minerals, Liquor, etc.
- Section 206C(1G): TCS on Overseas Remittances (under LRS) & Sale of Motor Vehicles
- Section 206C(1H): TCS on Sale of Goods (if turnover > ₹10 crores & receipt > ₹50 lakhs)
(D) Compliance Requirements
- TAN Registration: Mandatory for deductors/collectors.
- Deposit of TDS/TCS: Within specified due dates.
- TDS/TCS Returns (Quarterly): Filing via Form 24Q (Salaries), 26Q (Non-Salary), 27Q (NR Payments), 27EQ (TCS).
- Issue of Certificates:
- Form 16 (Salaries)
- Form 16A (Non-Salary TDS)
- Form 16B (TDS on Property Purchase u/s 194IA)
- Form 16C (TDS on Rent u/s 194IB)
- Form 27D (TCS Certificate)
(E) Penalties for Non-Compliance
- Late deduction/collection: Interest u/s 201(1A)
- Late payment: Interest u/s 220(2)
- Late filing of returns: Fee u/s 234E + Penalty u/s 271H (up to ₹50,000)
Key Points:
- TDSis deducted by the payer at the time of payment/credit.
- TCSis collected by the seller at the time of receipt.
- Complianceincludes deduction/collection, deposit, return filing, and certificate issuance.
- Non-complianceattracts interest, penalties, and prosecution.
