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What Is the Difference Between TDS and TCS in India?

TDS is withheld by a payer; TCS is collected by a seller or specified collector. Learn how transaction rules, timing and India’s 2026 tax-law change affect each.
From TheFinanceBase Team3 min to read
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TDS is tax deducted by a payer from certain payments; TCS is tax collected by a seller or another specified collector in certain transactions. Neither is a universal tax rate: whether one applies, and at what rate or threshold, depends on the transaction, the parties and the law in force on the relevant date.

How TDS and TCS differ

Question TDS TCS
What happens? A payer deducts tax from a specified payment or credit. A seller or other specified collector collects tax in a specified transaction.
Who is responsible? The payer, known as the deductor. The seller or other specified person, known as the collector.
What determines whether it applies? The payment type, payer and payee categories, threshold, rate and timing under the relevant provision. The transaction type, collector and collectee categories, threshold, rate and timing under the relevant provision.
What should you check? The current TDS provision and the rule for your payment category. The current TCS provision and the rule for your transaction category.

The Income Tax Department explains that rates and monetary thresholds depend on the relevant provisions and Finance Acts; it does not set one rate for all TDS or one rate for all TCS. It describes the rates and thresholds as largely the same as under the previous law, while noting that TDS rates and thresholds were retained in the new Act. Check the exact rule for the transaction rather than relying on a general percentage. See the Department’s Tax Payments FAQ and TDS Compliance guidance.

Which law and section apply from 1 April 2026?

India’s Income Tax Act, 2025 commenced on 1 April 2026. The Department says TDS provisions previously spread across sections 192–194T of the 1961 Act are now consolidated primarily in section 392 for salary and section 393 for other specified payments. TCS is consolidated under section 394.

For relevant events through 31 March 2026, the Income Tax Act, 1961 applies. For events from 1 April 2026, use the corresponding provisions of the 2025 Act. The section number to cite therefore depends on the date and type of transaction. For post-commencement transactions, the Department advises using the new section or table item in filings; an old section reference may trigger system validation errors. The Department’s Tax Payments FAQ and TDS Compliance explain the change.

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How the transition date affects TDS and TCS

Non-salary TDS

For non-salary TDS, identify which came first: payment or credit. If that event occurred on or before 31 March 2026, the 1961 Act applies; if it occurred on or after 1 April 2026, use the corresponding provision of the 2025 Act. Salary TDS is based on payment.

TCS

For TCS, the Department applies a similar transition principle using the relevant debit or receipt event. Amounts debited or received by 31 March 2026 remain under the old Act; from 1 April 2026, section 394 of the 2025 Act applies.

These timing rules mean that the date money is later remitted to the government does not, by itself, determine which law applies. For a transaction that crosses the commencement date, verify the relevant event and provision in the Department’s TDS Compliance guidance.

How to check and claim the tax credit

Tax withheld or collected is reported for the relevant income-tax period; the date the payer remits it is not the only date that matters. The Department says TDS for FY 2025–26 appears in AIS for AY 2026–27, while Tax Year 2026–27 information is reflected in Form 168. Reconcile the information statement with your own records and contact the deductor or collector to resolve a mismatch. The Department’s TDS Compliance guidance covers this transition, and its Salaried Individuals for AY 2025-26 guidance discusses TDS/TCS information in Form 26AS.

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What to verify for a specific transaction

  • Classify the transaction: identify whether it is a payment or credit potentially subject to TDS, or a transaction potentially subject to TCS.
  • Check the applicable provision for the transaction and the payer/payee or collector/collectee categories.
  • Confirm the threshold, rate and trigger event under that provision and the Finance Act in force for the relevant date.
  • Apply the 31 March/1 April 2026 transition rules before using a section number or filing reference.
  • Reconcile reported tax credit with your records and request a correction from the responsible deductor or collector if details do not match.

This is general information for India, not an individualized tax determination. Rates, thresholds and reporting details are transaction-specific and can change; consult the operative provision for the exact transaction and date.

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