TCS under Income Tax– Everything you need to know

The current article clears up all the basic concepts of TCS (Tax Collection at Source) like provisions of TCS; rate of TCS; payment of TCS; filing of TCS return; issuance of TCS certificate; exemptions; interest and late fees and FAQs.

What is TCS?

Basics of TCS-

Section 206C of the Income Tax Act deals with the TCS provisions. The same is simplified hereunder-

Person liable to collect TCS	Seller, of specified goods, being any of the following- Central Government, State Government, Any local authority/ corporation, Company, Co-operative Society, Firm, Individual or HUF subjected to audit under the Income Tax Act.
Specified goods covered under TCS	List of goods on which seller is liable to collect TCS are- Tendu Leaves. Alcoholic Liquor for human consumption. Timber obtained under- A forest lease; or Any mode other than a forest lease. Any other forest produce (other than timber or tendu leaves). Scrap. Minerals (coal or lignite or iron ore). Sale of a motor vehicle of value exceeding INR 10 Lakhs. Overseas tour program package. Parking lot, toll plaza or mining and quarrying. Any goods of value exceeding INR 50 Lakhs.
Time of collection of TCS	Earlier of the following period- At the time of debiting the amount payable by the buyer; or At the time of receipt of the amount from the buyer.

What are rates of TCS?

Rate of TCS-

The seller of specified goods is required to collect TCS at the following rates-

Specified goods	Corresponding rates at which TCS is to be collected
Tendu Leaves	5.00%
Timber obtained from forest lease or by any mode other than forest lease	2.50%
Alcoholic liquor for human consumption	1.00%
Any other forest produced (other than timber or tendu leaves)	2.50%
Scrap	1.00%
Minerals (coal or lignite or iron ore)	1.00%
Sale of motor vehicle exceeding INR 10 Lakhs	1.00%
Parking lot, toll plaza or mining and quarrying	2.00%
Seller of an overseas tour program package	5.00%
Any goods [except goods specified under section 206C(1), 206C(1F) and 206C(1G)] sold for consideration exceeding INR 50 Lakhs	0.10%

Payment of TCS-

Provision of rule 37CA defines the time period within which tax collected is to be deposited with the Government. The same is explained hereunder-

Particulars	Payment due date
Sum collected by Government office	Tax paid without production of income-tax challan- on the same day; or Tax payment is accompanied by an income-tax challan- on or before 7 days from the end of the month in which tax is collected.
Sum collected by offices other than Government office	Within one week from the end of the month in which tax is collected.

Filing of TCS return-

As per provision of rule 31AA, every collector of TCS is required to furnish TCS return in Form 27EQ. Notably, the time limit for furnishing the quarterly TCS return within the following due dates-

Particulars	Due date for filing TCS return
April – June	15th July
July – September	15th October
October – December	15th January
January – March	15th May

Issuance of TCS certificate-

Provisions of rule 37D require the TCS collector to issue a TCS certificate in Form 27D within a period of 15 days from the date of furnishing of TCS return. Accordingly, the collector is required to issue a TCS certificate within the following due dates-

Particulars	Due date for filing TCS return
April – June	30th July
July – September	30th October
October – December	30th January
January – March	30th May

Exemption available under TCS tax-

The seller is not liable to collect TCS under the following situations-

1. Buyer of the specified goods is any of the following-

a. A public sector company,

b. The central government,

c. A state government,

d. An embassy, a high commission, commission, legation, consulate and trade representation of a foreign state or club.

2. Buyer, in retail sale, purchases the goods for personal consumption.

3. Buyer purchases the goods either for manufacturing or processing or production. Here, such goods shouldn’t be purchased for trading.

Interest and late fees under TCS-

Applicable interest and late fees for non-complying with various provisions of TCS are tabulated hereunder-

Section	Particulars	Interest and late fees
Section 206C(7)	Interest for non-collection or non-deposit of TCS	1% per month or part of month
Section 271CA	Penalty for non-collection of TCS	Amount equal to TCS not collected.
Section 271H	Penalty for non-furnishing of TCS return	Minimum penalty – INR 10,000 Maximum penalty – INR 1 Lakhs.
Section 276BB	Punishment for non-deposit of TCS	Fine and imprisonment for a minimum period of 3 months and a maximum period up to 7 years.

FAQs-

Q.1 What is TCS tax?

TCS (Tax Collection at Source) is a tax that is payable by the seller after collecting the same from the buyer at the time of sale of the goods.

Q.2 What is TCS tax with example?

TCS is a tax collected by the seller from the buyer of the goods. For example-

Mr. A buys a scrap of INR 10,000 from Mr. B. Mr. B, being a seller, will be liable to collect TCS @1% on scrap sold to Mr. A. Accordingly, it will collect INR 10,100 [INR 10,000 sale consideration + INR 100 TCS].

Q.3 What is TCS tax in GST?

TCS under GST means the tax which is collected by the e-commerce operator from supplying goods/ services through their online platform.

Q.4 Is TCS tax refundable or not?

TCS tax paid by the buyer of the goods is credited against its PAN. Accordingly, the same is added to the tax payment of the buyer. TCS tax can be refunded, if the buyer is not able to utilize the same.

Q.5 What is the difference between TDS and TCS?

TDS is tax deducted on payment exceeding specified limits, whereas, TCS is a tax collected by the seller on selling specified goods. Further, TDS is applicable on payments like salary; rent; interest; professional fees etc. whereas, TCS is applicable on the sale of goods like scrap; timber; tendu leaves; etc.

Q.6 Is TDS and TCS applicable on the same transaction?

Applicability of TDS and TCS on the same transaction is possible only under TDS section 194Q and TCS section 206C(1h). Notably, provisions of section 194Q clearly state that TDS is deductible even if TCS is collected under section 206C(1h).

Accordingly, if TDS is deducted under section 194Q, the seller will not be required to collect TCS under section 206C(1h).

Watch Our Video on TCS under Income Tax Act, 1961