There are two different types of taxes in India- direct and indirect. The direct taxes are applicable to your income and profits. On the other hand, indirect taxes such as excise duty, service tax, octroi, and customs duty are paid on goods and services.

Talking about the income tax, it is a percentage of your income as per the tax slabs, which you are required to pay to the government every year. Details of income tax collection state-wise are then released by the government every year.

But how is tax collection done in India? Let us have a look at different ways in which the government collects income tax-

1. TDS

TDS or Tax Deducted at Source is the tax deduction that occurs at the source itself. For instance, if you are a salaried employee, your employer will deduct TDS and give the same to the government. Your TDS is calculated as per your income tax slab.

Apart from your salary, TDS is also deducted from interest payments, rent, professional fees, commission, etc. Depending on who is deducting the TDS, you will either receive Form 16 or Form 16A with detailed information about the deducted tax. You will need this form while filing your income tax returns.

2. TCS

Sellers collect TCS or Tax Collected at Source from buyers. All the goods for which TCS is applicable are mentioned under Section 206C of the IT Act. The TCS rates vary based on the product sold. For instance, TCS on Tendu leaves is 5%, and the same for liquor of alcoholic nature is 1%.

It is important to note that the seller here is not paying any kind of tax. He/she is only collecting it from the buyers and passing the same to the government. Sellers are required to deposit TCS collected from buyers within a week from the last day of the month when the tax was collected.

3. Online/Offline Tax Payments

While the TDS is automatically deducted at source, there are still other types of taxes such as Self-Assessment Tax, Regular Assessment Tax, and Advance Tax that taxpayers might be required to pay to the government. Challan 280 can be used for paying such income taxes online or offline.

You can visit the TIN NSDL website for paying these taxes online. Another option is to pay the same offline at one of the designated bank branches empanelled by the IT department.

The income tax collection mechanism is well-structured in India to ensure that the taxpayers experience complete convenience. Moreover, the government also makes regular improvements to the same to further strengthen the nation and aid its development.


The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.

Trending Articles

Article Links

How to Calculate Income Tax

Income Tax Benefit

Tax Saving Investment

Tax Saving Investments Under 80C

What is Tax

Latest Articles


How to save on gift tax in India?

Read More
Posted on 11 February 2020

Nearing 60? Here are tax benefits you didn’t know about

Read More
Posted on 11 February 2020

Steps for Beginners to Filing Income Tax Return in India

Read More
Posted on 10 February 2020