TDS & TCS Basics

The Government doesn't trust you to pay tax at the end of the year. So, they collect it at the source (when you earn it).

1. What is TDS (Tax Deducted at Source)?

• Concept: The Payer cuts tax before paying the Payee.
• Example:
  • Company pays Salary to You.
  • Company cuts TDS.
  • Company deposits TDS to Govt against your PAN.
  • You claim it when filing ITR.

Common TDS Rates:

• Salary: Based on your tax slab.
• FD Interest: 10% (if interest > ₹40k/year).
• Dividends: 10% (if > ₹5k).
• Crypto: 1% on sale.
• Rent: 5% (if rent > ₹50k/month).

2. What is TCS (Tax Collected at Source)?

• Concept: The Seller collects tax from the Buyer.
• Example:
  • You buy a Car > ₹10 Lakhs. Dealer collects 1% TCS.
  • You buy Foreign Currency (LRS) > ₹7 Lakhs. Bank collects 20% TCS.

3. Form 26AS & AIS

This is your "Tax Passbook".

• It shows all TDS/TCS deducted against your PAN.
• Rule: Always check 26AS before filing ITR. If TDS is not there, you won't get credit.

4. Form 15G / 15H

• If your total income is below taxable limit (₹2.5L / ₹3L), but Bank is cutting TDS on FD.
• Submit Form 15G (Age < 60) or 15H (Senior Citizen) to Bank.
• They will stop cutting TDS.

7-Day Action Plan

Day 1: Login to Income Tax Portal. View your Form 26AS.
Day 2: Check AIS (Annual Information Statement). It shows everything (Stocks bought, FD interest, Dividends).
Day 3: If you have FDs, check if interest > ₹40,000. If yes, expect TDS.
Day 4: If you are a freelancer, know that clients deduct 10% TDS (Section 194J).
Day 5: Buying a car? Check if TCS was collected. You can claim it back in ITR.
Day 6: If you are sending money abroad for education, check TCS rates (0.5% for loan, 5% otherwise).
Day 7: Remember: TDS is not an extra tax. It is advance tax. If you paid excess, you get a refund.

Quiz

💡 Final Wisdom: TDS is just a parking spot for your money. File your ITR to drive it back home (Refund).