Tax collected at source (TCS) is the tax payable by a seller which he collects from the buyer at the time of sale. Section 206C of the Income-tax act governs the goods on which the seller has to collect tax from the purchasers.

1. Goods covered under TCS Provisions with TCS rates

Section Collection code Nature of payment Threshold
Amount
TCS Rates (%)
F. Y. 2021 2022 Individual / HUF to
Other
206C A Alcoholic Liquor for human consumption 1 1
206C B Timber obtained under a forest lease 2.5 2.5
206C C Timber obtained by any other mode 2.5 2.5
206C D Any other forest produces not being a timber or tendu leave 2.5 2.5
206C E Scrap 1 1
206C F Grant of license, lease, etc. of Parking lot 2 2
206C G Grant of license, lease, etc. of Toll Plaza 2 2
206C H Grant of Mining and quarrying 2 2
206C I Tendu Leaves 5 5
206C J Minerals, being coal or lignite or iron ore (Applicable from F.Y. 2012-13 onwards) 1 1
206C K TCS on sale of Bullion (Applicable from F.Y. 2012-13 to 2016-17) In Excess of Rs. 200000 1 1
206C L TCS on Motor Vehicle (Applicable from F.Y. 2016-17 onwards) In Excess of Rs. 1000000 1 1
206C M TCS on sale in cash of any goods (other than bullion/jewellery) (Applicable for F.Y. 2016-17 ) In Excess of Rs. 200000 1 1
206C N TCS on providing of any services (other than Ch-XVII-B) (Applicable for F.Y. 2016- 17) In Excess of Rs. 200000 1 1
206C O TCS on remittance under LRS for purchase of overseas tour program package (Applicable from F.Y. 2020-21 onwards) 5 5
206C P TCS on remittance under LRS for educational loan taken from financial institution mentioned in section 80E (Applicable from F.Y. 2020-21 onwards) 0.5 0.5
206C Q TCS on remittance under LRS for purpose other than for purchase of overseas tour package or for educational loan taken from financial institution (Applicable from F.Y. 2020-21 onwards) In Excess of Rs. 700000 5 5
206C R TCS on sale of goods (Applicable from F.Y. 2020-21 onwards) In Excess of Rs. 5000000 0.1 0.1

2. SELLER FOR TCS

There are some specific people or organizations who have been classified as sellers for tax collected at source. No other seller of goods can collect tax at source from the buyers apart from the following list:

  • Central government
  • State government
  • Local Authority
  • Statutory Corporation or Authority
  • Company registered under the companies act
  • Partnership firm
  • Co-operative Society
  • Any person or HUF who is subjected to an audit of accounts under the income tax act for a particular financial year.

TCS Basic Concept With List of Goods Covered Under TCS

3. BUYER FOR TCS

A buyer is a person who obtains goods of specified nature in any sale or right to receive any such goods, by way of auction, tender or any other mode.

4. EXEMPTED BUYERS:

the below buyers are exempted from collection of tax at source

  • Public Sector Companies
  • Central Government
  • State Government
  • Embassy of high commission
  • Consulate and other Trade Representation of a Foreign nation clubs such as sports clubs and social clubs

5. TCS NON-APPLICABILITY

Tax collection at source is exempted in the following cases:

  • When the eligible goods are used for personal consumption
  • The Purchaser buys the goods for manufacturing, processing, or production and not for the purpose of trading those goods.

6. EXAMPLES FOR UNDERSTANDING TCS

Buyer is purchasing a car that costs Rs 15 lakhs then an amount of Rs 15,000 would be payable as TCS. This amount would need to be submitted to a particular branch of the bank which has been given permission by the government for receiving such payments. The person who is selling those cars is only responsible for collecting the cash from the buyer and paying it to the government and he doesn’t pay anything herself or himself.

7. SOME IMPORTANT POINTS

1. TDS deducted by buyer and TCS collected by seller.

2. Tan no is mandatory

3. The Seller deposits the TCS amount in challan 281 within 7 days from the last day of the month in which the tax was collected.

4. TCS return file quarterly basis.

5. Failure to file your TCS returns within the due date will mean that you will be subject to a late filing fee of Rs.200 per day. The fee will be charged for every day after the due date, until the date on which your return is filed. However, the maximum fees that you will have to pay will be limited to the TDS amount.

Example

TCS return was need to be file for TCS amount 10000 on dated 15 July for first quarter ending but return was filed for this period on 30 Sep. In this case penalty arise by amount 15400 for 77 days (16 July to 30 Sep). However, since your TCS payable amount is Rs.10,000, your late filing fees will be only Rs.10,000 and not Rs.15,400. But an interest will be charged to you.

6. Under Section 201(1A) of the Income tax Act 1961, if tax is not deducted at source, either partly or fully, an interest rate of 1% per month will be applicable from the date on which tax was supposed to be subtracted to the date on which it is actually subtracted. In case tax has been deducted, and has not been paid either partly or fully, an interest rate of 1.5% per month will be applicable from the date on which tax was deducted to the date on which it was paid.

7. Form 27EQ filed for collection of tax at source.

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