TDS vs TCS: what is the difference?
Updated 11 October 2026
TDS (tax deducted at source) is tax that the person paying you cuts from the payment and deposits with the government, for example your employer on salary or your bank on FD interest. TCS (tax collected at source) is tax a seller adds on top of what you pay them and deposits in your name, for example on large foreign remittances or a car purchase. Neither is an extra tax: both are advance payments of your own income tax, and you get credit for them when you file your return.
TDS and TCS side by side
| TDS | TCS | |
|---|---|---|
| Who handles it | The payer (employer, bank, tenant, buyer) | The seller or service provider |
| When | When paying you or crediting your account | When collecting money from you |
| Effect on you | You receive less than the gross amount | You pay more than the price |
| Common examples | Salary, FD interest, rent, professional fees, property purchase, dividends | Foreign remittances under LRS, overseas tour packages, cars above ₹10 lakh, scrap and some minerals |
| Certificate | Form 16 (salary), Form 16A (others) | Form 27D |
| Shows in | Form 26AS and AIS against your PAN | |
Under the Income-tax Rules, 2026 these certificates were renumbered (Form 16 is reported to be Form 130), but your employer and bank will still call them Form 16 and Form 16A for a while.
Common TDS you will see
- Salary: your employer estimates your tax for the year and deducts it monthly. See TDS on salary.
- Bank and post office interest: 10% when interest from one bank crosses ₹50,000 a year (₹1,00,000 for senior citizens). Senior citizens and people with income below the taxable limit can submit Form 15H or 15G to avoid it.
- Rent: individuals paying rent above ₹50,000 a month deduct 2%.
- Buying property worth ₹50 lakh or more: the buyer deducts 1% from the payment to the seller.
- Dividends above ₹10,000 a year from one company: 10%.
Without a valid PAN, TDS is generally deducted at 20% or twice the rate, whichever is higher. See PAN card.
Common TCS you will see
- Foreign remittances under the Liberalised Remittance Scheme (LRS): no TCS on the first ₹10 lakh in a year. Above that, TCS is 20% for most purposes, such as investing abroad or gifts. Education funded by a loan from a financial institution has no TCS, and Budget 2026 cut the rate for other education and medical remittances to 2%.
- Overseas tour packages: Budget 2026 cut TCS to 2%.
- Motor vehicles costing more than ₹10 lakh: 1% of the price.
The old TCS on the sale of goods by large sellers was removed from 1 April 2025, so you should no longer see it on ordinary purchases.
Worked example
Total tax already paid in his name = ₹2,40,000 + ₹1,00,000 + ₹12,000 = ₹3,52,000. If his actual tax for the year is ₹2,90,000, he gets a refund of ₹3,52,000 − ₹2,90,000 = ₹62,000 when he files his return.
Salaried people can also ask their employer to take TCS (and TDS on other income) into account so that less TDS is cut from salary for the rest of the year, which avoids waiting for a refund.
How to claim credit
- Check that each TDS and TCS entry appears in Form 26AS and AIS against your PAN.
- Collect certificates (Form 16, 16A, 27D) and match the amounts.
- File your income tax return. The pre-filled return picks up the credits. Report the related income too: you cannot claim TDS on FD interest without showing the interest.
- If the credits exceed your tax, you get a refund. If they fall short, pay the balance as self-assessment tax before filing.
Common mistakes
- Thinking TDS on interest means no further tax. TDS is 10%, but if you are in the 20% or 30% slab, you owe the difference.
- Forgetting TCS paid on a foreign trip or remittance. It is your money and can be adjusted against tax or refunded.
- Ignoring a missing entry. Only the deductor or collector can correct their TDS or TCS return, so ask them early.