TCS – Tax Collection at Source – A Complete Guide

Tax Collection at Source, more popularly known as TCS, provisions mandate the seller to collect tax from the buyer and deposit the same to the Government. The provision of tax collection at source is contained under section 206C of the Income Tax Act, 1961 and the same are explained briefly in the current article.

Guidelines of section 206C

Provisions of section 206C of the Income Tax Act, 1961 requires the specified seller to collect the tax from the specified buyer of the specified goods and at specified rates. The seller is liable to collect the tax at earlier of the following dates –

• At the time of debiting of the account of the buyer; or
• At the time of receipt of the amount from the buyer in cash / cheque / draft or any other mode.

Listing the Specified goods, specified rates, specified seller and specified buyers –

The specified goods and specified rates of TCS are detailed herein below –

Points to be noted –

• No TCS would be collected if the buyer purchases the goods for the purpose of manufacturing / processing or production. TCS is to be collected only in case the goods are used for the trading purpose.
• TCS would not be collected if the buyer purchases the specified goods for personal consumption.

The specified sellers are listed here under –

The explanation (c) to section 206C provides the meaning of the term ‘seller’, and as per the same the following are the list of specified sellers who are required to collect tax (TCS) –

• Any Local Authority;
• The Central Government;
• The State Government;
• The Companies registered under the Companies Act;
• The firms;
• The Statutory Corporation / authority;
• The Co-operative Society;
• The individual or a HUF whose total sales / turnover / gross receipts from the business / profession exceeds the monetary limit specified under section 44AB (a) or section 44AB(b) during the Financial Year immediately preceding the Financial Year in which the specified goods are sold.

The specified buyers are listed here under –

The explanation (aa) to section 206C provides the meaning of the term ‘buyer’ and as per the same the buyer means the following –

Surcharge applicability –

In addition to the above specified TCS rates, the surcharge would be added if applicable as tabulated below –

Due date for the deposit of TCS with the Government

The seller who is liable to collect tax is required to deposit the same to the Government on a monthly basis in Challan 281 within the following due dates –

It should be noted that the TCS collected by the Government office needs to be deposited on the same day of the collection.

TCS return filing requirement

The tax collector is required to submit TCS return quarterly in Form 27EQ. The due date for filing of the TCS return in Form 27EQ is tabulated here under –

Issuance of TCS certificate

The TCS collector is required to issue a certificate in Form 27D within 15 days of from the due date of filing of the TCS return. The due dates for the issuance of TCS certificate in Form 27D is summarized here under –

Frequently Asked Questions (FAQs) on TCS

1. What is Section 206C?

Provisions of section 206C of the Income Tax Act, 1961 provides that the seller is required to collect the tax from the buyer on the sale of certain specific goods.

2. Who will deduct TCS?

TCS is not deducted, in fact, it is collected by the seller from the buyer at the time of sale of certain specified goods.

3. What is the difference between tax deducted at source and tax collected at source?

TDS is the tax deductible before making payment to the Deductee, whereas, the TCS is the amount of tax collected by the seller from the buyer at the time of sale of the specified goods.

TDS is treated as an expense to the company, on the other hand, TCS is treated as an income to the company.

TDS is applicable on specified expenses when the amount paid exceeds the specified exemption limit, whereas, TCS is applicable on sale of certain specified goods.

4. Is tax collected at source refundable?

Yes, the tax collected at source by the seller (paid by the buyer) is in the form of tax which can be adjusted by the buyer against its tax liability. However, if the buyer doesn’t have the taxable income, then, the TCS can be claimed as a refund.

5. Is TCS collected on GST?

The CBIC has clarified that the taxable value for the purpose of goods and service tax (GST) shall include the amount of TCS.

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