Income Tax Overview

Article
10/18/2021

Income tax is levied by the government on income received by people, corporations, and legal entities.

Types of Income Tax

Income taxes include the following:

Tax Deducted at Source (TDS)
Tax Collected at Source (TCS)

Tax Deducted at Source

Tax Deducted at Source (TDS) is a method of collecting income tax from the assessee. This tax is deducted at the source for a specific type of income.

The Income Tax Act allows employers and those who pay income to deduct a specific percentage as income tax, and pay only the remaining balance to the recipient. The amount deducted must then be paid to the central government by a specified date.

The income recipient may deduct this amount from the total income liability during tax assessment.

TDS is collected for the following types of income:

Salary
Dividends, unless exempt under section 115(o)
Interest, other than interest on securities
Payment to contractors and subcontractors
Insurance commissions
Payment to a non-resident sportsman/sports association
Payment of National Savings Scheme (NSS)
Payment on repurchase of units by mutual funds or Unit Trust of India (UTI)
Lottery winnings
Horse race winnings
Commission or remuneration of prizes on sale of lottery tickets
Commission and brokerage
Payment of rent
Fees for professional and technical services
Payment to non-residents

TDS is also deducted on the gross value of bills inclusive of all taxes, such as service tax and VAT.

In Microsoft Dynamics NAV, you can print the following TDS reports:

Form 16A
Form 26Q
Form 27Q

For more information, see How to: Set Up Tax Deducted at Source and How to: Print Reports for Tax Deducted at Source.

Tax Collected at Source

Tax Collected at Source (TCS) follows the principle that you pay as you earn. In Microsoft Dynamics NAV, you can use TCS to do the following:

Collect taxes at source
Deposit taxes
Update deposit information
Issue certificates
Print annual returns

TCS is paid to the seller by the buyer at the time that goods and services are sold. The taxes that are collected must be deposited using the ITNS281 form. Taxes must be deposited within one week following the last day of the month in which they were collected.

TCS is collected for the following goods and services:

Alcohol for human consumption
Tendu leaves
Timber obtained under a forest lease
Timber obtained by any mode other than a forest lease
Any forest product that is not timber or tendu leaves
Scrap
Indian-made foreign liquor
Parking lots
Toll plazas
Mining and quarrying

TCS is collected by the following:

Central government
State government
Corporations and authorities established by or under a Central Act, State Act, or Provincial Act
Companies
Cooperative societies
Individuals and Hindu Undivided Families (HUF) with a gross income of more than 40 lakhs or a professional income of 10 or more lakhs liable to tax audit

The TCS certificate, Form 27D, is issued 30 days after the end of the tax month. For more information, see How to: Print Reports for Tax Collected at Source.

TCS returns are submitted quarterly using Form 27EQ. Returns are issued within 15 days after the end of each quarter. You can also submit quarterly returns for a tax year. Returns are issued within 76 days after the last quarter.

Quarterly TCS returns cannot be submitted unless interest for a late deposit of TCS is paid.

In Microsoft Dynamics NAV, you can print the following TCS reports:

Form 27D
Form 27EQ

For more information, see How to: Set Up Tax Collected at Source and How to: Print Reports for Tax Collected at Source.

Income Tax Overview

Types of Income Tax

Tax Deducted at Source

Tax Collected at Source

See Also

Tasks

Additional resources