TDS AND TCS PROVISIONS UNDER INCOME TAX

Entities (both corporate and non-corporate deductors) making payments (specified under Income Tax Act) to third parties (deductees) are required to deduct tax at source (Tax Deducted at Source -TDS) from these payments and deposit the same at any of the designated branches of banks authorised to collect taxes on behalf of Government of India.

TAX DEDUCTED AT SOURCE (TDS):

TDS is known as Tax Deducted at Source, it is the income tax which is deducted from the payment made at the time of making some specified payments like rent, professional fees, commission, interest, salary etc. Normally whenever any individual earns income it shall be necessary to pay tax on the same income but in case of TDS government makes sure that the income is reduced in advance from the payment which is going to be made by an individual. The receiver who will receive the income will get the net amount which is after deducting TDS. The receiver can add the gross amount to his income and the TDS amount will get adjusted against his liability of final tax. 

PERIOD FOR TDS RETURN:

Return for Tax Deducted at Source is mandatory for filing who is deducting tax. TDS return shall be filed every quarterly and also numerous details shall be mentioned like TAN, type of payment, deducted TDS amount, PAN of deductee etc. There are many forms which is specified for returns which depends upon different type of Deduction of TDS. Different types of forms are as follows:

• Form 24Q which is for TDS in salary and due date for filing this return is Quarter 1 is 31st July, for Quarter 2 is 31st October, for Quarter 3 is 31st January and for Quarter 4 is 31st May.
• Form 27Q which is for TDS on all payments made to Non-Residents but except salaries and due date for filing this return is Quarter 1 is 31st July, for Quarter 2 is 31st October, for Quarter 3 is 31st January and for Quarter 4 is 31st May.
• Form 26QB which is for TDS on sale of property and due date for filing this return is 30 days from the end of the month in which TDS is deducted.
• Form 26QC which is for TDS on rent and due date for filing this return is 30 days from the end of the month in which TDS is deducted.

TAX COLLECTED AT SOURCE (TCS):

TCS is known as Tax Collected at Source which is the tax which is collected by seller from buyer at the time of sale. Section 206C of the Income Tax Act, 1961 controls the goods on which seller has to collect the tax from all the purchases.

LATEST UPDATE FOR TCS:

SECTION 206CCA:

New Section has been inserted for collecting a higher rate of TCS for those person who is not paying filing tax return from last two years, this was decided in Union Budget 2021.

Here tax is required to be collected at source under the provisions of Chapter XVII-BB, on any sum or amount received by a person (hereafter referred to as collectee) from a specified person, the tax shall be collected at the higher of the following two rates, namely:—

(i)   at twice the rate specified in the relevant provision of the Act; or
(ii)  at 5 per cent

“specified person” here means a person who has not filed the returns of income for both of the two AY relevant to the two FY immediately prior to the FY in which tax is required to be collected, for which the time limit of filing return of income under sub-section (1) of section 139 has expired; and the aggregate of TDS and TCS in his case is rupees fifty thousand or more in each of these two previous years

SECTION 206 (1H):

This is a new section which was launched in October, 2020 for collecting TCS from the buyers of goods who is making a payment of amount exceeding Rs 50 Lakhs which shall be towards the sale consideration in the current Financial Year. The TCS shall be collected by entities which is having more than Rs 10 Crore of turnover in the previous Financial Year.

The TCS is payable on the amount of receipt which is greater than 50 Lakhs and received after 1st. Oct. 2020. The rate of TCS is 0.1% 

TCS PAYMENTS AND RETURNS:

• All the sums which is collected by an office of the Government shall be deposited on the same day of when it was collected.
• The seller has to deposit the amount of TCS in Challan 281 within 7 days from the last day of the month in which the tax has to be collected.
• If the person who is collecting the TCS, the tax collector is responsible for collecting the tax and he has to deposit the same amount to the government who is not collecting the tax or after he collects he doesn’t pay the amount to the government as per the due dates which are mentioned above, then he will be liable to pat 1% interest per month.
• Tax Collector has to quarterly submit the return of TCS that is Form 27EQ which is related to the tax which is collected by tax collector in a particular quarter.