Tax Collected at source (TCS) is governed by Section 206C of Income Tax Act, 1961 in India. A person collects TCS from buyer while selling goods to the buyer. TCS is collected at the time of debiting the amount receivable or at the time of receipt of the amount, whichever is earlier. The amount so collected from the buyer shall be remitted by the seller within 7 days from the end of the month in which tax was collected at source to the credit of Central Government.
In India, TCS is applicable for limited specified goods only. It means whenever you will sale this goods, you will have to collect TCS from the buyer.
Tax Collected at Source is applicable for following goods in India.
| S. No | Name of Goods | Percentage |
| 1 | Alcoholic Liquor for human consumption | 1% |
| 2 | Tendu leaves | 5% |
| 3 | Timber obtained under a forest lease | 2.5% |
| 4 | Timber obtained by any mode other than under a forest lease | 2.5% |
| 5 | Any other forest produce not being timber or tendu leaves | 2.5% |
| 6 | Scrap | 1% |
| 7 | Minerals, being coal or lignite or iron ore | 1% |
No Tax is collected if the buyer furnished in a prescribed form that the above goods purchased are to be used for manufacturing and not for trading purpose.
Further it is provided that any person transferring the rights of following mentioned goods will have to collect TCS.
| S. No. | Nature of Contract/License/lease | Percentage |
|---|---|---|
| 1 | Parking Lot | 2% |
| 2 | Toll Palaza | 2% |
| 3 | Mining and quarrying | 2% |
Amendments in TCS by Finance Act 2016.
Sub Section 1D provides for Tax collection @1% on sale of jewellery or bullion if the amount is received in cash and the amount exceeds Rs. 1,00,000 in case of bullion and Rs. 5,00,000 in case of Jewellery.
This subsection is amended by Finance Act 2016 to include collection of TCS @1% on sale of goods or services, other than Jewellery or bullion if the amount received in cash exceeds Rs. 2,00,000.
So from 1st June 2016 onward if any goods or service is purchased for cash exceeding Rs. 2,00,000 then TCS @ 1% is collected by the seller from buyer.
New subsection 1F is also introduced by Finance Act 2016 to provide that TCS @1% shall be collected by the seller of Motor vehicle from buyer if the amount of total consideration exceeds Rs. 10,00,000. This is also effective from 1st June 2016.
Any amount collected as TCS and deposited in the account of government shall be deemed to be tax paid by the Buyer and he can claim credit of that amount. The seller will issue the buyer a TCS certificate in prescribed form for TCS collection.
Further Government has issued circular 23/2016, to remove the doubts that TCS @ 1% is only applicable on cash portion of the transaction. For example if the payment is made in cash & Cheque and the total amount exceeds Rs. 2 lac, then TCS will not be applied.
TCS Return
The seller will also file a TCS return in Form 27EQ on or before 15th July, 15th October, 15th January in respect of first three quarters and on or before 15th May for the last quarter of the financial year.
The seller collecting tax will also have to remit the taxes collected in the account of government within prescribed time. Otherwise interest @ 1% & penalty is levied on such amount for any delay and will be treated as assessse in default.
A seller is not treated as assesse in default, who fails to collect tax, if the buyer shows income in his return filed U/s 139 and paid tax thereon. A certificate of CA is also required in that effect.
Under section 206CA, every person liable to collect tax shall apply for Tax collection account number.
What is the difference in TDS and TCS?
The concept of Tax collect at source is same as tax deducted at source. The basic difference is that in TDS payer deduct TDS from receiver, but in TCS receiver collects TCS from payer.
TCS covers very less transaction whereas TDS covers vast range of transactions.
Read here the full concept of TDS
Read here the latest TDS rate chart
You can ask any query related to “tax collected at source” through comments.
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Thanks for sharing Educative material on TCS