The difference between TDS and TCS is the direction of the money: TDS (tax deducted at source) is cut by the person making a payment, such as a company paying a contractor, while TCS (tax collected at source) is added by a seller to the price paid by a buyer, such as a car dealer on a ₹12 lakh car. Both end up as a credit against the PAN of the person who bears them.
TDS covers many kinds of payments under sections 192 to 194T of the 1961 Act. TCS covers a short list of sales and foreign remittances under section 206C. Under the 2025 Act, TDS moved to sections 392 and 393 and TCS to section 394. The table below sets out every difference, and the sections after it cover rates, dates and the GST versions. New to the topic? Start with what TDS is.
Quick facts
TDS full form
Tax Deducted at SourceTCS full form
Tax Collected at SourceTDS by
The payerTCS by
The seller or remitting bankTDS returns
Quarterly, due 31 July, 31 October, 31 January, 31 MayTCS return
Form 27EQ, due 15 July, 15 October, 15 January, 15 MayNew sections
TDS 392 and 393; TCS 394
Difference between TDS and TCS, point by point
| Point | TDS | TCS |
|---|---|---|
| Who acts | Payer, at payment or credit | Seller, when receiving or debiting the price |
| Effect on the bill | Payee gets less | Buyer pays more |
| Law (1961 Act) | Sections 192 to 194T | Section 206C |
| Law (2025 Act) | Sections 392 and 393 | Section 394 |
| Typical cases | Salary, rent, fees, contracts, interest | Scrap, liquor, forest produce, motor vehicles above ₹10 lakh, foreign remittances, overseas tours |
| Deposit | 7th of the following month; March tax by 30 April | Within 7 days of the month end |
| Quarterly return | Form 24Q, 26Q or 27Q | Form 27EQ |
| Certificate | Form 16 or 16A | Form 27D |
| Interest for delay | 1% or 1.5% a month | 1% a month |
Both are filed with a TAN, paid through Challan 281 and shown in the receiver's Form 26AS, so the credit can be used against tax in the return.
TCS in income tax: main rates
| Sale or remittance | Rate |
|---|---|
| Scrap | 1% |
| Alcoholic liquor for human use | 1% |
| Tendu leaves | 2% |
| Timber and other forest produce | 2.5% |
| Coal, lignite, iron ore | 1% |
| Motor vehicle above ₹10 lakh | 1% |
| Foreign remittance under LRS, other purposes | 20% above ₹10 lakh |
| Remittance for education or medical treatment | 5% above ₹10 lakh; nil for education funded by a loan |
| Overseas tour package | 5% up to ₹10 lakh, 20% above |
The 0.1% TCS that sellers collected on goods under section 206C(1H) was removed from 1 April 2025, leaving the buyer's TDS under 194Q as the only levy on large goods purchases.
Examples of TDS and TCS on real bills
TDS. A hotel pays ₹60,000 to an interior design firm for professional advice. Under 194J at 10%, it deducts ₹6,000 and pays the firm ₹54,000.
TCS. A factory sells ₹5,00,000 of iron scrap to a dealer. It adds TCS at 1%, ₹5,000, and collects ₹5,05,000 plus GST. The dealer claims the ₹5,000 in its return.
In the first case the receiver of money bears the tax. In the second the buyer bears it. Either way, the cut or the extra amount is not a cost if it is claimed in the return.
TDS TCS changes for tax year 2026-27
| Item | FY 2025-26 | Tax year 2026-27 |
|---|---|---|
| TDS law | Sections 192 to 194T | Sections 392 and 393 |
| TCS law | Section 206C | Section 394 |
| TCS on overseas tour packages | 5% up to ₹10 lakh, 20% above | 2%, with no threshold |
| TCS on LRS for education or medical treatment | 5% above ₹10 lakh | 2% above ₹10 lakh |
| Lower deduction or collection certificate | Form 13 | Form 128 |
The lower tour and education rates came in through the Finance Act, 2026 from 1 April 2026; other LRS remittances stay at 20% above ₹10 lakh. See the 2025 Act overview for the renamed forms.
TDS and TCS in GST
GST has its own TDS and TCS, separate from income tax. Government bodies and registered buyers of metal scrap deduct 2% GST TDS under section 51 of the CGST Act; see GST TDS. E-commerce operators collect GST TCS under section 52 on sales made through their platform, at 0.5% of net taxable supplies since FY 2024-25. These are filed on the GST portal, not with a TAN.
TDS TCS return due dates and the correction last date
| Quarter | TDS return | TCS return (27EQ) |
|---|---|---|
| April to June | 31 July | 15 July |
| July to September | 31 October | 15 October |
| October to December | 31 January | 15 January |
| January to March | 31 May | 15 May |
Under the 1961 Act, from 1 April 2025 a correction statement cannot be filed once six years have passed since the end of the financial year that the original statement fell due in. Statements under the 2025 Act carry their own time limit, so check the portal before relying on an old period. Late returns cost ₹200 a day under section 234E.
Mixing up TDS and TCS: common errors
| Problem | Fix |
|---|---|
| Seller charges TCS on goods under the removed 206C(1H) | Stop it; the buyer handles 194Q TDS instead |
| Reporting TCS in Form 26Q | TCS goes in Form 27EQ |
| Buyer treats TCS as a cost | Claim it as tax paid in the return |
| Traveller ignores TCS on a tour package | Claim it in the return or adjust it against TDS on salary |
The above is general guidance on Indian TDS and TCS, not advice for your case. Each Finance Act can move rates and forms, so before acting, check where things stand now on the e-filing portal or with your own chartered accountant.
Sources we checked
- Income-tax Act, 1961, section 206C
- Income-tax Act, 2025, sections 392, 393 and 394
- Finance Act, 2025
- Finance Act, 2026
- CGST Act, 2017, sections 51 and 52
Frequently asked questions
What is the difference between TDS and TCS?
TDS is deducted by the payer from a payment, so the receiver gets less. TCS is collected by the seller on top of the price, so the buyer pays more. Both are credited to the PAN of the person who bears them.
What is the full form of TDS and TCS?
TDS is short for Tax Deducted at Source, and TCS for Tax Collected at Source.
What is TCS in income tax?
It is tax a seller collects from the buyer on specified sales, such as scrap or cars above ₹10 lakh, and on foreign remittances and tour packages, under section 206C, now section 394.
What are the TDS TCS return due dates?
TDS returns are due 31 July, 31 October, 31 January and 31 May. TCS returns in Form 27EQ are due 15 July, 15 October, 15 January and 15 May.
Can TCS on a foreign trip be adjusted against salary TDS?
Yes, a salaried person can tell the employer about TCS paid, and the employer can take it into account when working out TDS on salary. Otherwise, claim it in the return.