TDS or Tax Deducted (or withheld) at Source was introduced to capture tax revenue at the source. As a result, when a company or tax payer (e.g. A) pays another tax payer (e.g. B), they (A) must subtract TDS from the payments being made to B and deposit it to the Central Government.
 

In this manner, taxes are collected in advance and the central government tracks income. When filing an income tax return, the taxpayer (B) can claim the TDS. The taxpayer (B) may claim the TDS after submitting Form 26AS (TDS certificate).

The rate of TDS varies depending on the kind of income, the kind of taxpayer, and the taxpayer’s place of residence.
 

Tax Collected at Source (TCS) is a tax payable by a seller which he collects from the buyer at the time of sale of goods. The items on which TCS can be levied are listed in Section 206C of the Income Tax Act, 1961. 

 

It is a concept where a person selling specific items is liable to collect tax from a buyer at a prescribed rate and deposit the same with the government.

For example if you are buying a car of worth more than 10 lakh rupees, a TCS of 10% will be collected by the car seller or the showroom from you and deposited to the government.
 

Under TCS, there are some specific people or organizations who have been classified as sellers: Central Government, State Government, Local Authority, Statutory Corporation or Authority, Company registered under the Companies Act, Partnership firms, Co-operative Society and any person or HUF who is subjected to an audit of accounts under the Income-tax Act for a particular financial year.
 

Major differences between TDS and TCS

1. TDS is the tax which is the deducted on a payment made by a company to an individual, in case the amount exceeds a certain level . TCS is the tax which is collected by sellers while selling something to buyers.
2. TDS deduction is applicable on payments such as salaries, rent, professional fee, brokerage, commission, etc. TCS deduction is applicable on sales of goods like timber, scrap, mineral wood and so on.
3. TDS is applicable only on payments that exceed certain amount. TCS is applicable on sales of specific goods which do not include production and manufacturing material.

Read TCS on Remittances