1. Tax collection at source (TCS) is an additional amount collected as tax by a seller of specified goods from the buyer at the time of sale over and above the sale amount and is remitted to the government account. As per Income Tax Act 1961 certain persons, being the sellers must collect a specified percentage of tax (as given in para 8 below) at the time of receipt of amount from their buyers or at the time of debiting of the account of the buyer whichever is earlier. Section 206C of the Income Tax Act mentions the particulars of goods, on sale of which tax needs to be collected from the purchasers.

2. However, no collection of tax (TCS) shall be made in case buyer, who is resident of India, if such buyer furnishes to the collector (seller) the declaration in writing to the effect that the goods are to be utilized for the purpose of manufacturing, processing or producing article or things (all for the purpose of generation of power) and not for trading purpose. One copy of such declaration is required to be submitted to the Chief Commissioner of Income Tax or Commissioner of Income Tax on or before expiry of 7 days from the end of the month in which the sale is effected. For example If sale is effected on 10th of September, the declaration is to be filed before 7th of October.

Tax Collection At Source (TCS)

3. Besides sale of goods, every person who enters into an agreement of lease, license or contract for parking lot, toll plaza or mining or quarrying will collect an amount @ 2% from such parties as TCS.

4. The person collecting tax has to obtain Tax Collection Account Number (TAN) and quote it in all challans, certificates and returns and all other documents pertaining to the transactions. The buyer shall furnish his Permanent Account Number (PAN) to the seller, failing which tax shall be collected at the higher rate (twice or 5 percent whichever is higher).

5. If the person responsible for collection of TCS fails to collect or after collecting fails to pay, he shall be deemed to be an assessee in default in respect of the tax and various consequences will follow.

6. Classification of Sellers and Buyers for TCS

(a) Under TCS mechanism a Seller is defined as any of the following:

1. Central Government

2. State Government

3. Local Authority

4. Statutory Corporation or Authority

5. Company registered under Companies Act

6. Partnership firms

7. Co-operative Society

8. Any person or HUF who is subjected to an audit of accounts under Income Tax Act for a particular financial year.

(b) A Buyer is classified as a person who obtains goods or the right to receive goods in any sale, auction, tender or any other mode.

7. TCS is not necessary for the following buyers:

a. Public Sector Companies

b. Central Government

c. State Government

d. Embassy of High commission

e. Consulate and other Trade Representative of a Foreign Nation.

f. Clubs such as Sports clubs and Social Clubs

g. Local authority for the purpose of purchase of vehicle

Classification of Sellers and Buyers for TCS

8. Goods and transactions covered under TCS provisions and rates applicable to them

The rate of TCS is different for goods specified under different categories :

Nature of Goods Rate applicable from 01.04.2020
to 13.05.2020
Rate applicable from 14.05.2020 to 31.03.2021
Liquor of alcoholic nature, made for consumption by humans 1% 1%
Timber obtained under a forest lease 2.5% 1.875%
Tendu leaves 5% 3.75%
Timber obtained by any other mode than forest leased 2.5% 1.875%
A forest produce other than Tendu leaves and timber 2.5% 1.875%
Scrap 1% 0.75%
Minerals like lignite, coal and iron ore 1% 0.75%
Purchase of Motor vehicle exceeding Rs. 10 Lakhs 1% 0.75%
Parking lot, Toll Plaza and Mining and Quarrying 2% 1.5%

9. Surcharge and Health & Education Cess on TCS Rates

Status Payment Exceeds Surcharge
Rates
Non Resident Payment more than 10%
Individuals/HUF Rs. 50 lakh to
Rs. 1 crore
Payment Rs. 1 crore to Rs. 2 crore 15%
Payment Rs. 2 crore to Rs. 5 crore 25%
Payment exceeding 37%
Rs. 5 crore
Non Resident— Payment more than 12%
Co-operative Rs.1 crore
society/firm
Non-domestic Payment more than 2%
company Rs. 1 crore but not more than Rs. 10 crore
Non-domestic Payment more than 5%
company than Rs. 10 crore

Health & Education Cess @ 4% on TCS + Surcharge as applicable.

10. TCS Payments

a) The seller shall deposit the TCS amount in Challan 281 within one week of the last day of the month in which the tax was collected. This payment can be made in any branch of RBI, SBI or any other authorized bank or the same can also be paid electronically.

b) All sums collected by an office of the Government should be deposited on the same day of collection.

11. Failure to make payment to Government Account

a) If the tax collector responsible for collecting the tax and depositing the same to the Government does not collect the tax then he will be liable to pay interest of 1% per month or a part of the month. In addition to the amount of TCS he failed to collect. If after collecting doesn’t pay the tax to the Government within due dates, then he is liable for interest @ 1% per month of delay (if due date falling between 01.04.2020 to 29.06.2020) rate of interest is 0.75% per month or part of the month.

b) The person would also be liable for penalty u/s 271CA of the Act, which would be equal to amount of tax liable to be collected.

c) The person will also be liable to prosecution u/s 276BB of the Act, term of which is upto 7 years of imprisonment.

12. TCS Returns & Certificate of TCS

It is mandatory for all collectors of tax to furnish Quarterly TCS returns (Form 27EQ) online to CPC-TDS in electronic mode within the prescribed time. The collector can also file correction statement for rectification of any mistake, add/delete or update the information already furnished.

Note: Filing of TCS return after due date is liable for Late Filing Fee of Rs.200/- per day for the period of delay from due date.

The Collector of TCS has to provide a TCS certificate in Form 27D to the purchaser of the goods.

The due dates for delivering TCS quarterly returns and issue of TCS certificates is as under:

Quarter Ending Due Date o
filing return
Date for generating Form 27D
30th June 31st March 2021 As Per Notification No.35 /2020 15th April 2021
30th September 31st March 2021 As Per Notification No.35 /2020 15th April 2021
31st December 15th January 30th January
31st March 15th May of the FY immediately following the FY in which collection is made. 30th May

Note: Failure to furnish certificate may attract penalty of Rs.100/- for every day of delay.

13. TCS Exemptions

Tax collection at source is exempt in the following cases:

a. When the eligible goods are used for personal consumption

b. The purchaser buys the goods for manufacturing, processing or production and not for the purpose of trading of those goods.

14. Lower Rate of TCS

The buyer (licensee) can apply to the Assessing Officer (TDS) for a lower rate, using Form No.13, subject to the condition that the AO is convinced that the total income of the buyer (licensee) justifies the lower rate. The AO may issue a certificate, specifying the rate of collection u/s 206C. Such certificate is now being issued online through the TRACES portal on the application submitted online.

Lower Rate of TCS

15. NEW PROVISIONS APPLICABLE FROM 01 OCTOBER, 2020

a. Every authorized dealer who receives an amount of Rs. 7 lakhs or more in a financial year for remittance out of India from a buyer of foreign currency remitting under Liberalized Remittance Scheme (LRS) (other than overseas tour program package) is liable to collect tax @ 5% (if no Aadhaar or PAN @10%) at the time of debiting or receipt of amount. {Section 206C(IG)(a) of IT Act, 1961).

b. Every seller whose gross turnover exceeds Rs. 10 crores in preceding financial year, receives sale consideration of any goods exceeding Rs. 50 lakhs is liable to collect tax © 0.1% (If no Aadhaar or PAN-1%) of sale consideration exceeding Rs. 50 lakhs from the buyer at the lime of receipt. {Section 206C(H) of IT Act 1961}.

New Provisions Applicable From 01 October, 2020

Source- incometaxindia.gov.in

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6 Comments

  1. kulothugan Periyasamy says:

    Customer is holding saving account and family account with us. Customer is buying the digital tokens through online by using the Debit card and selling the digital tokens in India. There is TCS charges debited from the customer account and account went into negative balance in the account. customer is saying that this transaction is not belongs to LRS scheme and whether TCS applicable in this transaction.???

  2. UTPAL BASU says:

    I am an Indian individual tax payer. My TRACES shows under Part B – TCS the following :
    Total amount paid / debited – Rs. 12,674/-
    Total tax collected & Deposited : Nil
    How to include this in IT Return ?

  3. Komal ahuja says:

    How much tcs to be deducted on night wears hoseiry and sateen material! N what would b the amount exceeding?
    On which tax to be applicable!

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