Income tax is levied by the government on income received by people, corporations, and legal entities.
There are two types of Income Tax
- 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:
- 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
In Microsoft Dynamics NAV, you must set up Tax Deducted at Source (TDS) groups and TDS details to calculate the TDS amount. TDS groups represent the various sections of the Income Tax Act under which the taxes are deducted. In the TDS Groups window, you must define the conditions for deducting tax for each group. You must also define the nature of transaction for which the TDS is applicable.
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
- 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
- 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
In Microsoft Dynamics NAV, you must set up Tax Collected at Source (TCS) to calculate TCS amounts.