TDS & TCS Rates in India — Complete Deduction and Compliance Guide

If you earn salary, receive rent, or sell goods above certain limits, the Indian government requires tax to be deducted or collected at the source itself. This guide explains TDS (Tax Deducted at Source) and TCS (Tax Collected at Source) — what they are, current rates, who must comply, and how to stay compliant.

Disclaimer: CitizenNest is not affiliated with the Income Tax Department or any government body. This guide is for informational purposes only. Always verify details on the official Income Tax portal or consult a qualified tax professional.

What is TDS (Tax Deducted at Source)?

TDS is a system where the payer deducts a percentage of tax before making a payment to the payee. The deducted amount is deposited with the government on behalf of the payee.

Example: If your employer pays you ₹50,000 salary and deducts ₹5,000 as TDS, you receive ₹45,000. The ₹5,000 goes to the government and is credited against your tax liability.

Who Must Deduct TDS?

• Employers paying salary
• Banks paying interest above ₹40,000 (₹50,000 for senior citizens)
• Tenants paying rent above ₹50,000 per month
• Businesses/professionals making specified payments (contract, commission, professional fees, etc.)
• Any person making payment under sections where TDS applies

What is TCS (Tax Collected at Source)?

TCS is tax collected by the seller from the buyer at the time of sale of certain goods or services. The seller deposits the collected tax with the government.

Example: If you buy a car worth ₹12 lakh, the dealer may collect 1% TCS (₹12,000) from you and deposit it with the government.

Who Must Collect TCS?

• Sellers of specified goods (scrap, minerals, timber, motor vehicles above ₹10 lakh, etc.)
• Sellers of goods whose turnover exceeds ₹10 crore (TCS on sale of goods above ₹50 lakh per buyer)
• Authorised dealers collecting foreign remittance under LRS
• Tour operators collecting payment for overseas tour packages

TDS vs TCS — Key Differences

TDS Rate Chart for FY 2025-26 (AY 2026-27)

Below are the most common TDS rates applicable for payments made during FY 2025-26:

Note: If the payee does not provide PAN, TDS is deducted at 20% or the applicable rate, whichever is higher (Section 206AA).

TCS Rate Chart for FY 2025-26

Note: TCS does not apply if the buyer is liable to deduct TDS on the same transaction under Section 194Q.

How to Get TAN (Tax Deduction Account Number)

TAN is mandatory for anyone who deducts or collects tax at source. You must quote TAN in all TDS/TCS returns, challans, and certificates.

Steps to Apply for TAN

1. Visit the NSDL TAN application page.
2. Select Form 49B — Application for TAN.
3. Fill in the details — name, address, type of deductor, PAN, etc.
4. Pay the application fee (currently ₹77 including GST for online).
5. Submit the form and note the acknowledgement number.
6. TAN is usually allotted within 7-15 working days.

Tip: You can also apply offline by submitting Form 49B at any TIN Facilitation Centre.

For more details on TAN, see our TDS Return Filing guide.

How to File TDS/TCS Returns

TDS/TCS returns must be filed quarterly. Here are the forms and due dates:

TDS/TCS Return Forms

Quarterly Due Dates

Steps to File TDS Return Online

1. Download the RPU (Return Preparation Utility) from TRACES or TIN-NSDL.
2. Prepare the return using RPU — enter deductee details, PAN, amount paid, TDS deducted, challan details.
3. Validate the file using the FVU (File Validation Utility).
4. Generate the validated .fvu file.
5. Log in to the Income Tax e-Filing portal.
6. Go to e-File → Income Tax Forms → File TDS Return.
7. Upload the .fvu file and submit.
8. Verify using DSC (Digital Signature Certificate) or EVC.

For a detailed walkthrough, read our complete TDS Return Filing guide.

Form 26AS — Your Tax Credit Statement

Form 26AS is an annual tax statement that shows all TDS/TCS deducted against your PAN. It is essential for filing your Income Tax Return.

What Form 26AS Contains

• TDS deducted by employers, banks, and other deductors
• TCS collected by sellers
• Advance tax and self-assessment tax paid
• Details of high-value transactions (SFT)
• Refunds received

How to Check Form 26AS

1. Log in to the Income Tax e-Filing portal.
2. Go to e-File → Income Tax Returns → View Form 26AS (Tax Credit).
3. Select the assessment year and click View/Download.
4. Verify that all TDS/TCS entries match your records.

Important: If any TDS is missing from Form 26AS, contact the deductor to file or correct the TDS return. You cannot claim credit for TDS not reflected in 26AS.

Read our detailed Form 26AS & AIS guide for more.

TDS/TCS Compliance Checklist

Follow these steps to stay fully compliant with TDS and TCS provisions:

1. Obtain TAN — Apply for TAN before making any tax deduction or collection.
2. Deduct/Collect at correct rate — Refer to the rate charts above. Use the correct section and rate.
3. Deposit TDS/TCS on time — Pay the deducted/collected tax to the government by the 7th of the following month (30 April for March deductions).
4. File quarterly returns — Submit Form 24Q/26Q/27Q/27EQ before the due dates.
5. Issue TDS/TCS certificates — Provide Form 16/16A (TDS) or Form 27D (TCS) to deductees/buyers within prescribed time.
6. Verify Form 26AS — Ensure all deductions reflect correctly in the payee's Form 26AS.
7. Collect PAN from payees — Without PAN, you must deduct TDS at 20%.
8. File correction returns — If you discover errors, file correction returns promptly on TRACES.
9. Maintain records — Keep all challans, returns, and certificates for at least 7 years.
10. Check for lower deduction certificates — If a payee provides Form 13 for lower/nil TDS, deduct accordingly.

Penalties for Non-Compliance

Documents Required for TDS/TCS Compliance

• TAN allotment letter — Proof of your Tax Deduction Account Number
• PAN of deductees/buyers — Required to deduct TDS at correct rate (otherwise 20% applies)
• Form 16 / Form 16A — TDS certificates issued to employees / other deductees
• Form 27D — TCS certificate issued to buyers
• Challan 281 — Proof of TDS/TCS deposit with the government
• Form 26AS — Tax credit statement for verification
• Form 13 — Certificate for lower/nil deduction (if issued by the Income Tax Officer)
• Digital Signature Certificate (DSC) — Required for filing TDS returns (for companies and tax audited entities)

Frequently Asked Questions (FAQ)

1. What is the difference between TDS and TCS?

TDS is deducted by the payer before making payment. TCS is collected by the seller from the buyer at the time of sale. TDS reduces the payment received, while TCS increases the amount paid by the buyer. Both are deposited with the government and appear in Form 26AS.

2. Is TAN mandatory for TDS/TCS deduction?

Yes. TAN (Tax Deduction and Collection Account Number) is mandatory for any person who deducts or collects tax at source. Without TAN, you cannot file TDS/TCS returns or issue certificates. Exception: Under Section 194IB (rent by individual/HUF), TAN is not required — you can use your PAN instead.

3. What happens if TDS is deducted but not deposited?

The deductor will be charged interest at 1.5% per month from the date of deduction until deposit. Additionally, the deductor cannot claim the expense as a deduction in their income tax return until TDS is deposited (Section 40(a)(ia)). Criminal prosecution is also possible in serious cases.

4. Can I claim a refund of excess TDS deducted?

Yes. If TDS deducted exceeds your actual tax liability, you can claim a refund by filing your Income Tax Return. The excess amount will be refunded to your bank account after processing. Check your ITR refund status online.

5. What is Section 194Q (TDS on purchase of goods) and how does it relate to TCS under 206C(1H)?

Section 194Q requires buyers (whose turnover exceeds ₹10 crore) to deduct 0.1% TDS on purchase of goods above ₹50 lakh from a single seller. Section 206C(1H) requires sellers (with turnover above ₹10 crore) to collect 0.1% TCS on sale of goods above ₹50 lakh. If TDS is deducted under 194Q, TCS under 206C(1H) does not apply on the same transaction.

6. What TDS rate applies if the payee does not furnish PAN?

If the payee does not provide PAN, TDS is deducted at the higher of: (a) the rate specified in the relevant section, (b) 20%. This is as per Section 206AA. For TCS, a similar provision under Section 206CC applies at 5% or the applicable rate, whichever is higher.

7. How do I check if my employer has deposited my TDS correctly?

Log in to the Income Tax e-Filing portal, go to e-File → View Form 26AS, and verify the TDS entries for the relevant financial year match your Form 16. If there is a mismatch, contact your employer's accounts department immediately.

Related CitizenNest Guides

• How to File TDS Return Online — Step-by-step return filing with RPU and TRACES
• Form 26AS & AIS — Tax Credit Statement — How to view and download your tax credit statement
• How to File Income Tax Return Online — Complete ITR filing guide
• ITR Refund Status Check — Track your income tax refund
• ITR Forms — Which to Use — Choose the right ITR form
• PAN Card Apply Online — Apply for a new PAN card
• GST Registration Online — Register for GST
• GST Return Filing Online — File GST returns step by step