Difference between TDS and TCS in Bangladesh

Table of Contents

Introduction - Difference between TDS and TCS in Bangladesh

Difference between TDS and TCS in Bangladesh – TDS and TCS stand out as two pivotal streams of revenue for the government, constituting indispensable facets of financial governance. From the taxpayer’s perspective, these mechanisms are routine elements in the landscape of day-to-day business operations and economic activities. Ensuring compliance with TDS and TCS provisions is not merely a formality; it is a strategic imperative for entities seeking to steer clear of penalties and disallowances.

Embarking on an in-depth exploration of the distinctions between Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) unveils their intricate roles and significance within the realm of fiscal policies, particularly in Bangladesh.

What is TDS ?

Tax Deducted at Source (TDS) serves as a procedural mechanism implemented by the Tax Authority of Bangladesh to systematically gather taxes at the origin of income. This involves the deduction of a specified percentage of tax by the payer at the time of making payments to the receiver. The deducted amount is subsequently deposited to the government exchequer. The scope of TDS is very wide, encompassing various income categories such as salaries, interest on bank deposits and fixed deposits, profits from Bangladesh Shanchaypatra, consultancy services, rent, commissions, and more.

What is TCS ?

On the other hand, Tax Collected at Source (TCS) delineates a distinct method of tax collection set by the Tax Authority. Under the TCS framework, taxes are collected directly from the concerned individual at a predetermined rate. An illustrative example of TCS in action is the tax collection by Customs House during the importation of goods. Furthermore, TCS is exercised in areas such as the issuance and renewal of specific certificates, where authorities withhold the issuance or renewal until taxes are settled. It is also applicable in property transactions, where the transfer of titles is contingent upon the payment of due taxes.

Example of TDS and TCS

To clarify further, let’s explore practical scenarios for both TDS and TCS. In the case of TDS, imagine Chowdhury Industries Limited procuring office furniture from Otobi Furniture for Tk. 500,000, inclusive of applicable tax. At the time of making the payment, Chowdhury Industries is obligated to deduct a 3% tax (under Rule 3 of TDS Rules 2023), amounting to Tk. 15,000, leaving a net payment of Tk. 485,000.

Conversely, consider ABC Limited selling Fast-Moving Consumer Goods (FMCG) through its distributors. If the Maximum Retail Price (MRP) of a product is Tk. 1000 and ABC Limited sells it to its distributor for Tk. 850, a TCS of Tk. 2.13 is levied based on the prescribed rate under Section 94(3) of the Income Tax Act 2023.

How Tk. 2.13 has come? Here is the calculation:

TCS Amount = Sale Price × 5% × 5%

= Tk. 850 × 5% × 5%

= Tk. 2.13

Rate of TDS

Serial No	Name of Source	Section	Rate
1	Income from Employment (Salary Income)	86	Average rate
2	Remuneration to members of Parliament	87	Average rate
3	Payment to Workers’ Participation Fund & Benevolent Fund	88	10%
4	Payment to contractors, suppliers etc.	89	Refer to Rule 3 of TDS Rules 2023
5	Payment in case of services	90	Refer to Rule 4 of TDS Rules 2023
6	Payment for Intangible assets	91	10%; and 12% (if base value exceeds Tk. 25 lacs)
7	Advertising income of Media Broadcasting	92	5%
8	Payment to actors, actresses, producers, etc.	93	10%
9	Commission, discount, fees etc.	94(1) & 94(2)	10% 1.5%
10	Travel agent	95	0.30%
11	Amount received as commission on account of letter or credit	96	5%
12	Amount received as commission on account of local Letter of Credit (LC)	97	3% 2% 1%
13	Payments by cellular Mobile Phone operators	98	10%
14	Payment in excess of premium paid on Life Insurance Policy	99	5%
15	Amount of Insurance commission	100	5%
16	Fees, etc. of surveys of general insurance company	101	15%
17	Interest on saving deposit and fixed deposit etc.	102	20%, 10%, 5%
18	On Interest on deposit of post office savings bank account	103	10%
19	Interest income of resident	104	10%
20	Profit of saving instruments	105	10%
21	Interest on securities	106	5%
22	Discount on the real value of Bangladesh Bank bills	107	Maximum rate
23	Receipts in respect of international phone cell	108	1.5%, 7.5%
24	From rent	109	5%
25	For rendering of services from convention hall, conference centre, etc.	110	5%
26	Compensation against acquisition of property	111	6%, 3%
27	Export cash subsidy	112	10%
28	Freight Forward Agency commission	113	15%
29	Purchase of power	114	6%
30	Income received by the land owner from Real Estate Developer	115	15%
31	Commission or remuneration paid to agent of foreign buyer	116	10%
32	Dividend	117	10%, 15%
33	Income from lottery, etc.	118	20%
34	Income of non-residents	119	Maximum 30% (Refer to Rule 5 of TDS Rules 2023)
39	Income remitted from aboard in connection with any service, revenue, sharing etc.	124	10%, 7.5%

Rate of TCS

Serial No	Name of Source	Section	Rate
1	From Distributors or any other person (where sale to distributor lower than MRP)	94(3)	Price × 5% × 5%
2	From importers	120	Maximum 20% (Refer to Rule 7 of TDS Rules 2023)
3	Export manpower	121	10%
4	Clearing and Forwarding Agents	122	10%
5	Export income	123	1%
6	In case of Land transfer	125	Maximum 20% (Refer to Rule 6 of TDS Rules 2023)
7	Real Estate or Land Developer in case of Buildings or Apartments constructed for residential purposes	126	Maximum 20% (Refer to Rule 6a of TDS Rules 2023)
8	Commission on Govt. stamp, court fees and cartridge paper	127	10%
9	Lease of property	128	4%
10	Cigarette manufacturers	129	10%
11	Brick manufacturers	130	45,000 70,000 90,000 150,000
12	Issuance or Renewal of Trade License	131	500 1,000 2,000
13	Shipping business of a Resident	132	3% 5%
14	Sales by public auction	133	10% 1%
15	Transfer of share	134	15%
16	Transfer of securities including placement share	135	5%
17	Transfer of share of shareholder of stock exchanges	136	15%
18	Member of stock exchanges	137	0.05%
19	Motor vehicles plying commercially	138	Refer to Section 138
20	Operations of marine vessels	139	Refer to Section 139

Deposit of TDS and TCS amount to Govt. Treasury

Both TDS and TCS processes involves the depositing of the deducted or collected amounts into the Government Treasury. The timelines for these deposits are explicitly outlined in Rule 8 of the TDS Rules 2023. Whether it’s TDS or TCS, the deadlines remain consistent.

Here is the timeline to deposit tax deducted or collected amount.

Time of deduction or collection	Date of payment to the credit of the Govt.
In case of deduction or collection made in any month from July to May of a year	Within two weeks from the end of the month in which deduction or collection was made
In case of deduction or collection made in any day from the first to twentieth day of June of a year	Within seven days from the date in which deduction or collection was made
In case of deduction or collection made in any other dates of the month of June of a year	The next following day in which deduction or collection was made
In case of deduction or collection was made in the last working days of the month of June of a year	On the same day on which deduction or collection was made

Conclusion - Difference between TDS and TCS in Bangladesh

Difference between TDS and TCS in Bangladesh – Understanding TDS and TCS is important for businesses because it helps them comply with the law and manage their finances effectively. TDS and TCS are tax collection mechanisms that help the government collect taxes from businesses and individuals.

Taxpayers, the government, and the tax authorities all benefit from TDS and TCS. Taxpayers can be sure that their taxes are being paid correctly, and the government can collect taxes more efficiently. Tax authorities also benefit from TDS and TCS because it helps them reduce tax evasion and improve compliance.