TDS stands for Tax Deducted at Source, and it is a mechanism used by the government to collect tax at the time of transaction rather than at the end of the financial year.
The main difference between TDS in income tax and TDS in GST are:
- Applicability: TDS in income tax is applicable on income earned by individuals, whereas TDS in GST is applicable on certain types of goods and services.
- Rates: TDS rates in income tax vary depending on the nature of the payment and the status of the recipient. On the other hand, the TDS rates in GST are fixed at 2% for intra-state transactions and 2% for inter-state transactions.
- Registration: TDS in income tax requires the deductor to obtain a TAN (Tax Deduction and Collection Account Number) whereas in GST, the TDS deductor needs to be registered on the GST portal.
- Deduction: In income tax, TDS is deducted from the payment made to the recipient. In GST, TDS is deducted from the payment made to the supplier.
- Utilization of TDS: In income tax, the TDS deducted can be adjusted against the final tax liability of the recipient. In GST, the TDS deducted can be utilized by the supplier against his output tax liability.
- Compliance: Compliance requirements for TDS in income tax are different from those in GST. In income tax, quarterly returns need to be filed along with an annual return, whereas in GST, monthly TDS returns need to be filed along with an annual return.
In summary, while both TDS in income tax and TDS in GST are mechanisms for the government to collect tax at the source, they have different applicability, rates, registration, deduction, utilization, and compliance requirements.
