The Indian Income Tax Act has various provisions through which tax can be collected from a person. Tax deducted at source, advance tax, tax on income, and tax at source are some of the provisions, as mentioned. The tax collected at source deals with collecting tax from the buyer. However, not all, but specific transactions are covered under the provision of tax collected at source.
TCS stands for Tax Collected at source. The tax is collected by the seller from the buyer at the time of settlement of the bill/invoice. Here, the seller shall be the collector and buyer shall be the collectee. Section 206C (1) specifies tax to be collected at source by every person, being a seller from the buyer of goods.
The rates mentioned under TCS are:
The goods covered under TCS are:
It is pertinent to note that goods, as mentioned above, should not be used for manufacturing, processing or production of any other article as the same shall not attract tax collected at source. Also, transactions relating to the sale of jewellery or bullion will not attract TCS as the same shall now be covered under 269ST. Care must also be taken with regards to a transaction relating to motor vehicles, as TCS shall not be collected if the sale is made to Government, embassies, consulate, high commissions, legations, local authority or public sector company engaged in the business of carrying passengers.
| Nature of goods | Tax rates (%) |
|---|---|
| Alcoholic Liquor for consumption by humans | 1% |
| Timber wood , obtained from lease or otherwise | 2.5% |
| Parking lot, toll plaza, mining and quarrying but does not include mineral oil, petroleum, natural gas. | 2% |
| Scrap | 1% |
| Any other Forest produce | 2.5% |
| Motor vehicle where sale consideration is more than 10 lakhs | 1% |
| Tendu leaves/ Tobacco leaves | 5% |
| Mineral being coal, lignite or iron ore | 1% |
The collector/seller of TCS shall include only the following persons; no other person is allowed to collect TCS. The list as mentioned is:
A buyer is a person, who gets, in any sale, by way of auction, tender or any other mode, specified goods or right to receive any goods. However, the following shall not be included in the buyers’ category:
The person collecting tax at source, i.e. the sellers, shall provide the buyers with TCS certificate in Form27D. It shall be provided within 15 days from the date of filing TCS quarterly returns.
Where a TCS certificate is lost, a duplicate certificate shall be issued. This can be done by taking a print out on plain paper and getting it attested. Details, as required in Form 27D, shall be mentioned.
TCS shall be exempted under the following two cases:
Under the case as mentioned, an application shall be made to the Assessing Officer for collection of tax at lower rate. Application shall be made under Form 13 and this exemption shall be granted only if the officer is satisfied that the buyer’s total income justifies for lower rate. The officer shall issue a certificate for lower rate of collection.
A declaration shall be given by the buyer regarding non applicability of the provisions relating to TCS. Such declaration shall be made in Form 27C. It is the onus of the buyer to prove that goods are used for the purpose of manufacturing, processing or production.
Provisions relating to payment of taxes and filing of returns for TCS are similar to that of TDS. The due dates for payment of taxes to the credit of Government and filing of return is as follows: Payment of tax to the Government account shall be made by 7th of the month succeeding the month in which tax is collected. The seller shall deposit the TCS with Government in Challan 281.
For Example: If tax is collected in the month of January 2019, then the same shall be paid by 7th February, 2019. Persons liable to file TCS return shall file the same in Form 27EQ. The following are the due dates for filing of return under TCS
| Quarter ending | Due date for filing return |
|---|---|
| 30th June | 15th July |
| 30th September | 15th October |
| 31st December | 15th January |
| 31st March | 15th May |
In recent times, online businesses have seen a huge growth. In order to keep a tab on these businesses or businesses conducted through online platforms, the government has introduced the concept of TCS under Goods and Service tax. However, only those transactions in which consideration is received to e-commerce operator are covered.
Under this, the following steps shall incur:
Every person collecting tax at source shall file TCS returns under form 27EQ.
Form 27EQ shall be filed quarterly. The due dates of filing the returns are:
| Quarter ending | Due date for filing return |
|---|---|
| 30th June | 15th July |
| 30th September | 15th October |
| 31st December | 15th January |
| 31st March | 15th May |
Form 27EQ shall contain the following:
Non-filing of TCS returns shall attract penalty of Rs. 100 per day of default during which the failure continues. However, such penalty shall not exceed amount of tax that was to be deducted. Quantum of penalty is same, if TDS certificates have not been issued or tax has not been deducted and paid as required u/s 226(2).
Is it mandatory to furnish PAN by collectee?
Yes, it is mandatory for the collectee to furnish his PAN.
Whether surcharge and cess are to be added to the rates as mentioned above?
Surcharge and cess shall be added only if the purchaser, licensee or lessor is a non- resident. In the case of residents, the above-mentioned rates are flat rates.
Whether TCS is on sale of the motor car at the retail level or on sale of motor cars by manufacturers to dealers/ distributors?
TCS is only on the sale of the motor car at the retail level and not on the sale of motor cars by manufacturers to dealers/ distributors.
Whether TCS, in case of the motor car, is applicable on each sale made or on aggregate sales?
TCS in case of the motor car is applicable on each sale made and not on aggregate sales.
Whether TCS shall be collected if a taxpayer buys an elephant from the forest department in an auction sale?
Yes, TCS shall be collected in case of the auction sale of an elephant by the forest department as as defined under Central Forest Act & State Forest Act.
What is the interest liability for delay in payment of TCS?
As per Section 206C(7), if TCS is not deposited within 7 days from the end of the month in which it is collected, then interest shall be levied @ 1% per month or part of the month on amount of tax from the date on which it was collectible to the date on which such tax was actually paid.
When shall the interest be paid?
Interest for default shall be paid before furnishing the quarterly return statements of TCS.
Can TCS credit be claimed by the buyer?
TCS credit can be claimed by the buyer against his tax payable while filing his or her income tax return. If there is no tax payable, then he/she can apply for a refund of the same.
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