TDS/TCS, Invoicing, Due Dates, Interest, Late Fee and Penalties

Introduction: In financial Budget 2025, the focus of government is shifted toward on collecting the tax at the time when gain is arises. Government will not wait for completion of financial year or for due date for filling a return. TCS is a tax and not additional cost collected by seller.

To collect the tax on-is-basis government introduce TDS and TCS. This will help the income tax authority to track the business or income earn by a person and reduce tax evasion.

Payer (deductor) will pay amount after deduction of TDS as it meets threshold limit and pay deducted amount to income tax authority on due date. Receiver (deductee) will get the credit while filling the income tax return. On the basis of TDS deduction certificate provided by deductor.

TDS concept: TDS stand for Tax Deducted at Source. It is an amount deducted by the payer at the time of payment such as salary, interest, professional fees, rent, commission, etc. The basis though is collection of tax at source is easier than tax collection forms a person.

Deducted amount shall be deposited with income tax authority using PAN. At the time of filling income tax return deductee can get the credit of TDS or he can get refund.

For example:  If Tejas is paying rent of ₹90000p.m to Vijay then Tejas will deduct the TDS of ₹9000 @10% and pay ₹81000 to Vijay. He will report gross amount (₹90000) as rental income in ITR. In this case Tejas will not require to have TAN (Tax Deduction and Collection Account Number) in case of rent payment.

TDS concept: TCS stand for Tax collected at source. TCS is collected by seller in case of timber, scrap, wood, tendu leaves, minerals, and other similar products etc.  Section 206C of the Income-tax Act governs the goods on which the seller has to collect tax from the buyers. Such persons must have the Tax Collection Account Number (TAN) to be able to collect TCS.

For Example:

• Omkar buying Mercedes-Benz S-Class of ₹2.24 Crore from showroom.
• Showroom will collect TCS @1% from Mr. Omkar
• TCS amount will be ₹2.24 L (1% on ₹2.24cr)
• Showroom require to collect tcs when vehicle ex-showroom exceed ₹10L

TDS/TCS and GST Invoice: Form above we get that deductor is require to deduct TDS but here a question is arisen that on which amount deductor required to deduct TDS. And in case invoice include GST component?

• If invoice show the GST component separately then tds will deduct on taxable value as per sec 15 of GST Act
• If invoice doesn’t show gst separately then it will deduct on invoice value

For example: if taxable value in invoice is ₹10L and gst @18% is ₹18000 so invoice value will be ₹11.8L. Then tds is deducted on ₹10L however this breakup is not given then tds will deduct on ₹11.8L

Due date for payment:

Due date for return:

 Lower TDS certificate:

Lower TDS certificate is introduced for the taxpayer whose actual tax liability is lower than TDS deducted or he is not liable for filling return. Here taxpayer will request the income tax department for lower TDS deduction certificate. Department after verification will provide certificate (form13). Form 13 safeguard the taxpayer from delay in refund calming.

Interest and late fees:

As per sec 201(1A) of income tax act, deductor required to make payment of TDS deducted to income tax authority on 7^th of next month. However, he makes delay in payment then he liable to pay interest @1%p.m. from month of deduction and payment. If deductor make default in filling return then he liable for payment of interest @1.5%p.m

Late fees: As per sec 234E of income tax provision, late fees for filling late return are ₹200 per day but not exceed the total amount of TDS.  

For example-

• Tejas make payment of ₹100000 in the month of feb 2025 without TDS of ₹10000.
• He realises in the month of April and pay TDS to Government on 7^th may 2025. And fill return in the month of 31^st July
• Then interest will be ₹850 (for deduction ₹10000*1%*4M) + (For return ₹10000*1.5%*3M)

 Link for TDS calculation: 

https://incometaxindia.gov.in/pages/tools/tds-calculator.aspx