Indian Govt levies two types of taxes on citizens and businesses: Direct Tax and Indirect Tax.
Direct tax is levied directly on the citizen and is paid to the Govt. It cannot be paid to anyone else or transferred to any other entity. Hence, direct.
Indirect Tax is levied by the Govt on the sale of goods and services in India, and not on the income of any individual. This tax can be passed on from business to another, or from one individual to another, based on the nature of the transaction and goods/services being sold or bought.
While income tax is an example of direct tax, GST or Goods and Services Tax is an example of indirect tax.
Within indirect tax, there are two types of taxes: TDS and TCS.
TDS is Tax Deducted At Source
TCS is Tax Collected At Source
In this article, we will explain the main Difference between TDS and TCS and will explain how to file TDS online.
Definition Of TDS or Tax Deducted At Source
A tax which is deducted by companies or individuals when they are making a payment to some other individual or business when that payment crosses a certain threshold.
TDS is applicable on payment made for services received by the entity, e.g. Salaries, Rent, Commission, Interest, Professional Fee, etc.
Definition Of TCS or Tax Collected at Source
A tax which is collected by a business or individual, while selling a product or service to another individual.
TCS is applicable on sale of goods such as a motor vehicle, timber wood, minerals, etc.
TDS & TCS Difference: Two Examples
Assume there is an employee Mr. X, who is working for Mr. A as a software engineer. While paying a monthly salary to Mr. X, Mr. A will deduct an amount as tax, which is TDS. If the salary is Rs 20,000, then TDS applicable is 5%. Hence, Mr. X will receive a salary of Rs 19,000, with Rs 1000 TDS.
Assume there is a timber trader Mr. M, who is selling 2 tonnes of timber every quarter to Mr. Z. While selling the timber, Mr. M will collect 2.5% tax as TCS if the total transaction amount exceeds a particular limit And in this case, TCS will be collected by Mr. M from Mr. z over and above the value of 2 tonnes of timber being sold
How To Pay TDS Online?
The tax collected via TDS by any business or entity needs to be deposited with the Central Govt, and not doing so is a legal offence.
There are two ways to pay TDS: Online and Offline.
While online TDS payment can be done at https://www.tin-nsdl.com/, the offline deposit of TDS can be made at authorized bank branches, by furnishing Challan 281.
In this section, we will focus on How to pay TDS online, via electronic payment methods.
Before proceeding on steps on How to Make TDS payment, it’s important to note that the taxpayer needs to have a net banking account or debit card with the authorized banks, through which the tax money can be deposited with the Income Tax Govt.
The list of such banks is available at the Tax Information Network website of the Income Tax Department.
Steps for TDS payment online:
Step 2: Select the relevant Challan for making the tax payment.
There are various Challans available, based on the purpose and classification of the tax.
Here, we need to select Challan ITNS 281, which is used for depositing TDS by a company or non-company deductee.
Step 3: Fill in the Challan details.
For Challan ITNS 281, you need to enter the following details:
- Select ‘(0020) Company Deductee’ if the company is filling in the Challan, else fill ‘(0021) Non-Company Deductees’.
- If the taxpayer is paying the tax himself/herself, then select ‘(200) TDS/TCS Payable by Taxpayer’. If the TDS is payable via demand raised by IT Dept, then select ‘(400) TDS/TCS Regular Assessment’.
- Select the payment type of TDS deposit. Always check the TDS Rates list updated by Income Tax Dept for the same (https://www.incometaxindia.gov.in/charts%20%20tables/tds%20rates.htm)
- Mode of payment
- TAN Details. TAN or Tax Deduction and Collection Account Number is 10-digit code which needs to be mentioned in all TDS returns. This can be obtained via form 49B on the NSDL website.
- Assessment year
- Mobile, email id, address
- Captcha code
Step 4: Confirm the Challan details.
Step 5: Make The TDS Payment
After the challan details are verified and confirmed, the page to make the TDS payment will appear. The net banking page of the select bank will open up, where you need to enter id and password.
Once the payment is made, the website will display your challan counterfoil, which will have:
- Challan Identification Number (CIN)
- Payment details
- Date of tender Challan
- Bank details
- Branch details
- Bank Branch Code (BSR)
In the background, the collecting bank branch will process all these details to the Tax Information Network (TIN) via Online Tax Accounting System (OLTAS).
Step 6: Track the Status of TDS Payment
Once this is done, the taxpayer can track and access the status of the payment via “Challan Status Inquiry” on the website. The current status of the payment is usually displayed after 7 days of the payment done.
Both Challan Identification Number (CIN) and Tax Deduction and Collection Account Number (TAN) can be used to track the status of the payment.
Filing in TDS needs some expertise and knowledge of the tax codes, rules, and the current tax slabs for a successful deposit.
MSMEx, which is a micro-advisory platform, can help you with Effective ways of Tax planning, and for answering questions like How to Pay TDS on property, How to Deduct TDS on salary and more.
Get expert guidance and mentorship for tax-related queries at MSMEx by one-to-one consultancy with tax experts, right away.
Book your appointment right here.