TAX COLLECTED AT SOURCE (TCS)
MEANING
-Every seller shall collect tax from the buyer of any specified goods at the time of receiving the payment or debiting the buyer account whichever is earlier
-Section 206C of the Income Tax Act governs the goods on which the seller has to collect tax from the purchaser.
CLASSIFICATION OF SELLER AND BUYER FOR TCS
Specific people or organizations who have been classified as seller for TCS:
> Central Government
> State Government
> Local Authority
> Statutory Corporation
> Company registered under companies act
> Partnership Firm
> Co-operative Societies
> Individual or HUF liable for tax audit under income tax act for a particular financial year
- Similarly, Buyer for specified goods other than motor car means a person who obtains in any sale by way of auction, tender or any other mode specified goods or right to receive any such goods but does not include:
> Public sector company
> Central government
> State government
> Embassy of high commission
> Consulate and other Trade representation of a foreign nation
> Clubs such as sports club and social clubs
> A buyer in the retail sale of such goods purchased by him for personal consumption
| GOODS | RATE | SECTION |
| Alcoholic Liquor for Human Consumption | 1% | |
| Tendu Leaves | 5% | |
| Timber wood under a forest leased | 2.5%
|
|
| Timber wood by any other mode than forest leased | 2.5%
|
|
| A forest produce other than Tendu leaves and timber | 2.5%
|
|
| Scrap | 1% | |
| Minerals like lignite, coal and iron ore | 1% | |
| Parking lot, Toll Plaza, Mining and Quarrying | 2% | 206C(1C)
|
| Purchase of Motor Vehicle exceeding Rs. 10 Lakhs | 1% | 206C(1F)
|
| Sum of money above Rs. 7 lakhs for remittance out of India | 1% | 206C(1G) |
| Seller of an overseas tour program package | 5% |
Note:
- TCS need to be collected only when these specified goods are utilized for trading purposes.
TCS on Sale of Goods With Effect from 01.10.2020 under Section 206C(1H)
- In order to widen the scope of tax, a new sub section 206C(1H) is inserted with effect from 01.10.2020
- Section is applicable only in case of seller whose total sales, gross receipts or turnover from the business carried on by him exceeds Rs. 10 crores during the financial year immediately preceding the financial year in which the sale is carried out.
- TCS is required to be collected from the buyer whose aggregate purchases exceeds Rs. 50 lakhs in any previous year
- TCS on first 50 lacs is not required to be collected.
Let us understand through example:
| Seller | Aggregate Turnover during immediately preceding year | Buyer | Aggregate receipt against sales of goods during current year | Amount of TCS to be collected |
| A | 5 Crores | B | 80 Lacs | TCS not applicable as Mr. A does not fall in the definition of seller |
| A | 5 Crores | B | 40Lacs | TCS not applicable as Mr. A does not fall in the definition of seller and also aggregate receipt during the year does not exceed Rs. 50 lacs |
| A | 15 Crores | B | 80 Lacs | TCS applicable, Rs. 3000 (0.1% of Rs. 30 lacs) |
| A | 15 Crores | B | 40 Lacs | TCS not applicable as aggregate receipt during the year does not exceed Rs. 50 lacs |
Applicable rate of TCS under Section 206C(1H:
> TCS shall be collected @0.1% of the amount in excess of Rs. 50 Lacs
> If the buyer does not have PAN then rate would be 1%
> TCS rate has been reduced to 0.075% from 1st October 2020 to 31st March 2021
TCS Return
- Seller has to file return in Form 27EQ on quarterly basis
Due dates for TCS return filing:
| QUARTER | DUE DATE(NORMALLY)
|
| April-June | 15th July |
| July-September | 15th October |
| October-December | 15th January |
| January-March | 15th May |
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