{"id":2565,"date":"2025-07-08T11:44:21","date_gmt":"2025-07-08T06:14:21","guid":{"rendered":"https:\/\/www.solubilis.in\/blog\/?p=2565"},"modified":"2025-07-08T11:57:10","modified_gmt":"2025-07-08T06:27:10","slug":"gst-td-income-tax-tds-key-differences-you-must-know","status":"publish","type":"post","link":"https:\/\/www.solubilis.in\/blog\/gst-td-income-tax-tds-key-differences-you-must-know\/","title":{"rendered":"GST TDS vs Income Tax TDS: Key Differences You Must Know"},"content":{"rendered":"\n<p><\/p>\n\n\n\n<p>TDS, or Tax Deducted at Source, is a common term in the world of taxation. But did you know that India has <strong>two major types of TDS<\/strong> \u2014 one under the <strong>Income Tax Act<\/strong>, and another under the <strong>Goods and Services Tax (GST)<\/strong> regime?<\/p>\n\n\n\n<p>While both are meant to ensure tax compliance and prevent tax evasion, <strong>TDS under GST<\/strong> and <strong>TDS under Income Tax<\/strong> serve different purposes, apply to different entities, and follow separate compliance rules.<\/p>\n\n\n\n<p>If you&#8217;re a business, government department, or tax consultant, it&#8217;s essential to know <strong>when and how each applies<\/strong> \u2014 and how to stay compliant with both.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>What is TDS under Income Tax?<\/strong><\/h3>\n\n\n\n<p>Under the Income Tax Act, 1961, Tax Deducted at Source (TDS) is a mechanism through which the payer deducts tax at the time of making certain specified payments. These payments include salaries, rent, professional fees, interest, contract payments, commissions, and more. The primary objective of TDS is to collect tax at the source of income generation, ensuring that tax is paid in advance and credited to the recipient\u2019s PAN account. This system aids in reducing tax evasion and provides a steady flow of revenue to the government.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>Example<\/strong><strong>:<\/strong><\/h4>\n\n\n\n<p>You hire a consultant and pay them \u20b91,00,000 as professional fees.<br>You must deduct TDS @10% = \u20b910,000, and pay \u20b990,000.<br>The deducted \u20b910,000 is deposited to the government, and the consultant can claim it in their ITR.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>What is TDS under GST?<\/strong><\/h3>\n\n\n\n<p>TDS under <a href=\"https:\/\/www.solubilis.in\/gst-registration-in-chennai.php\">GST<\/a> is governed by <strong>Section 51 of the CGST Act<\/strong>. It applies to:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Government departments<\/li>\n\n\n\n<li>Local authorities<\/li>\n\n\n\n<li>Public sector undertakings<\/li>\n\n\n\n<li>Notified bodies<\/li>\n<\/ul>\n\n\n\n<p>These entities must deduct <strong>2% TDS<\/strong> on the taxable value (excluding GST) of goods\/services <strong>if the contract value exceeds \u20b92.5 lakh<\/strong>.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Key Differences Between GST TDS and Income Tax TDS<\/strong><\/h3>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><thead><tr><td><strong>Aspect<\/strong><\/td><td><strong>GST TDS<\/strong><\/td><td><strong>Income Tax TDS<\/strong><\/td><\/tr><\/thead><tbody><tr><td><strong>Law<\/strong><\/td><td>Section 51 of CGST Act<\/td><td>Income Tax Act, 1961<\/td><\/tr><tr><td><strong>Applicability<\/strong><\/td><td>Govt Depts, Local Authorities, Notified Entities<\/td><td>All specified payments (salary, rent, fees, etc.)<\/td><\/tr><tr><td><strong>Threshold<\/strong><\/td><td>Contract &gt; \u20b92.5 lakh (excluding GST)<\/td><td>Varies by payment type (e.g., \u20b930,000 for professional fees)<\/td><\/tr><tr><td><strong>Rate<\/strong><\/td><td>2% (1% CGST + 1% SGST or 2% IGST)<\/td><td>1%\u201330% depending on nature of payment<\/td><\/tr><tr><td><strong>When to Deduct<\/strong><\/td><td>At invoice booking or payment (whichever earlier)<\/td><td>At time of payment or credit<\/td><\/tr><tr><td><strong>Return Form<\/strong><\/td><td>GSTR-7 (monthly)<\/td><td>Various TDS returns like 24Q, 26Q (quarterly)<\/td><\/tr><tr><td><strong>Certificate<\/strong><\/td><td>GSTR-7A (auto-generated)<\/td><td>Form 16 \/ Form 16A (manual issuance)<\/td><\/tr><tr><td><strong>Interest on Late Payment<\/strong><\/td><td>18% per annum<\/td><td>1.5% per month or part thereof<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Example to Illustrate the Difference<\/strong><\/h3>\n\n\n\n<h4 class=\"wp-block-heading\">\ud83d\udd39 Scenario 1: TDS under Income Tax<\/h4>\n\n\n\n<p>You hire a marketing consultant for \u20b975,000.<br>You deduct TDS @10% = \u20b97,500 and pay \u20b967,500.<\/p>\n\n\n\n<p>\u27a1 Deposit \u20b97,500 to the income tax department by the 7th of next month.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\">\ud83d\udd39 Scenario 2: TDS under GST<\/h4>\n\n\n\n<p>A government department engages a vendor under a contract of \u20b93,00,000 (excluding <a href=\"https:\/\/www.solubilis.in\/\">GST<\/a>).<br>They issue an invoice of \u20b92,50,000 in April and \u20b950,000 in June.<\/p>\n\n\n\n<p>\u27a1 TDS @2% = \u20b96,000 on first invoice, \u20b91,000 on second invoice.<br>\u27a1 Must be deposited by 10th of May and July respectively.<\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"940\" height=\"788\" src=\"https:\/\/www.solubilis.in\/blog\/wp-content\/uploads\/2025\/07\/2-1.png\" alt=\"\" class=\"wp-image-2570\" srcset=\"https:\/\/www.solubilis.in\/blog\/wp-content\/uploads\/2025\/07\/2-1.png 940w, https:\/\/www.solubilis.in\/blog\/wp-content\/uploads\/2025\/07\/2-1-500x419.png 500w\" sizes=\"auto, (max-width: 940px) 100vw, 940px\" \/><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\">&nbsp;<strong>Mistakes to Avoid<\/strong><\/h3>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>Confusing the Two TDS Types<\/strong>:\n<ol class=\"wp-block-list\">\n<li>Businesses often wrongly apply income tax TDS rules to <a href=\"https:\/\/www.solubilis.in\/gst-registration-in-bangalore.php\">GST<\/a> TDS or vice versa. They are <strong>completely separate<\/strong> systems.<\/li>\n<\/ol>\n<\/li>\n\n\n\n<li><strong>Missing Thresholds<\/strong>:<ol><li>GST TDS applies per <strong>contract<\/strong> exceeding \u20b92.5 lakh (excluding GST), not per invoice.<\/li><\/ol>\n<ol class=\"wp-block-list\">\n<li>Income tax TDS thresholds vary by nature of payment.<\/li>\n<\/ol>\n<\/li>\n\n\n\n<li><strong>Wrong Timing<\/strong>:<ol><li>GST TDS: deduct at invoice or payment \u2014 <strong>whichever is earlier<\/strong>.<\/li><\/ol>\n<ol class=\"wp-block-list\">\n<li>Income Tax TDS: deduct at credit or payment \u2014 <strong>whichever is earlier<\/strong>.<\/li>\n<\/ol>\n<\/li>\n<\/ol>\n\n\n\n<h3 class=\"wp-block-heading\">&nbsp;<strong>Compliance Tips for Both Systems<\/strong><\/h3>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><thead><tr><td><strong>Compliance Area<\/strong><\/td><td><strong>GST TDS<\/strong><\/td><td><strong>Income Tax TDS<\/strong><\/td><\/tr><\/thead><tbody><tr><td><strong>Deposit Due Date<\/strong><\/td><td>10th of next month<\/td><td>7th of next month<\/td><\/tr><tr><td><strong>Return Filing<\/strong><\/td><td>GSTR-7 monthly<\/td><td>Form 26Q\/24Q quarterly<\/td><\/tr><tr><td><strong>Certificate Due Date<\/strong><\/td><td>Auto-generated (GSTR-7A)<\/td><td>Within 15 days of return due date<\/td><\/tr><tr><td><strong>Interest on Late Deposit<\/strong><\/td><td>18% annually<\/td><td>1.5% per month<\/td><\/tr><tr><td><strong>Penalty for Non-filing<\/strong><\/td><td>\u20b9100 per day (CGST + SGST)<\/td><td>\u20b9200 per day (max \u20b910,000)<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Why Does This Matter to You?<\/strong><\/h3>\n\n\n\n<p>If you&#8217;re:<\/p>\n\n\n\n<p>\u2705 A government contractor \u2014 you must track both <a href=\"https:\/\/www.solubilis.in\/gst-registration-in-coimbatore.php\">GST<\/a> and income tax TDS.<br>\u2705 A public sector official \u2014 your department needs to deduct and deposit GST TDS timely.<br>\u2705 A tax consultant \u2014 your clients need guidance to remain compliant on both fronts.<\/p>\n\n\n\n<p>Non-compliance in either case can result in <strong>loss of input credit<\/strong>, <strong>interest<\/strong>, <strong>penalties<\/strong>, and <strong>notices<\/strong> from tax authorities.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Final Summary<\/strong><\/h3>\n\n\n\n<p>\ud83d\udd39 <strong>TDS under GST<\/strong> applies only to notified entities and contracts over \u20b92.5 lakh.<br>\ud83d\udd39 <strong>TDS under Income Tax<\/strong> applies widely across types of payments and industries.<br>\ud83d\udd39 <strong>Different forms, deadlines, and interest<\/strong> rules apply.<br>\ud83d\udd39 Keep your accounting systems updated to handle both types properly.<\/p>\n\n\n\n<p><\/p>\n","protected":false},"excerpt":{"rendered":"<p>TDS, or Tax Deducted at Source, is a common term in the world of taxation. But did you know that India has two major types of TDS \u2014 one under the Income Tax Act, and another under the Goods and Services Tax (GST) regime? While both are meant to ensure tax compliance and prevent tax evasion, TDS under GST and [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":2566,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[775,108,49,789,150,863,927],"tags":[151,600,157,599],"class_list":["post-2565","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-best-services-for-solubilis-corporate-services","category-company","category-company-registration","category-goods-and-services-tax","category-gst","category-gst-registration","category-gst-supply","tag-gst","tag-gst-registration-in-bangalore","tag-gst-registration-in-chennai","tag-gst-registration-in-coimbatore"],"_links":{"self":[{"href":"https:\/\/www.solubilis.in\/blog\/wp-json\/wp\/v2\/posts\/2565","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.solubilis.in\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.solubilis.in\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.solubilis.in\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.solubilis.in\/blog\/wp-json\/wp\/v2\/comments?post=2565"}],"version-history":[{"count":2,"href":"https:\/\/www.solubilis.in\/blog\/wp-json\/wp\/v2\/posts\/2565\/revisions"}],"predecessor-version":[{"id":2571,"href":"https:\/\/www.solubilis.in\/blog\/wp-json\/wp\/v2\/posts\/2565\/revisions\/2571"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.solubilis.in\/blog\/wp-json\/wp\/v2\/media\/2566"}],"wp:attachment":[{"href":"https:\/\/www.solubilis.in\/blog\/wp-json\/wp\/v2\/media?parent=2565"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.solubilis.in\/blog\/wp-json\/wp\/v2\/categories?post=2565"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.solubilis.in\/blog\/wp-json\/wp\/v2\/tags?post=2565"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}