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 –

Sr. No. Specified goods Specified rates
Section 206C (1) – Sale of goods –
1 Alcoholic Liquor made for human consumption 1%
2 Scrap 1%
3 Minerals (being coal / lignite / iron ore) 1%
4 Tendu leaves 5%
5 Timber got under the forest lease 2.5%
6 Timber got under any other mode (except under the forest lease) 2.5%
7 Any other forest produce (except timber or tendu leaves) 2.5%
Section 206C (1C) – Contract / lease / licence
1 Parking lot 2%
2 Toll plaza 2%
3 Quarrying and mining 2%
Section 206C (1F) – Sale of motor vehicle
1 Sale of a motor vehicle of the value more than INR 10 Lakhs 1%

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 –

Buyer meaning with respect to specified goods mentioned in section 206C (1) – Buyer meaning with respect to specified goods mentioned in section 206C (1F) –
A buyer with respect to section 206C (1) means a person who obtains in any sale, by way of auction / tender / or any other mode, the specified goods but doesn’t include the following –

  • The Central Government;
  • The State Government;
  • A Public Sector Company;
  • An embassy / a high commission / legation / commission / consulate and trade representation of a foreign state; and
  • A club.

It also doesn’t include the buyer in the retail sale of goods purchased by him for personal consumption.

A buyer with respect to section 206C (1F) means a person who obtains in any sale the specified goods but doesn’t include the following –

  • The Central Government;
  • The State Government;
  • A Public Sector Company engaged in the business of carrying passengers;
  • An embassy / a high commission / legation / commission / consulate and trade representation of a foreign state; and
  • A local authority.

Surcharge applicability –

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

Category Particulars Surcharge
Non-resident Individual / a HUF / AOP / BOI Aggregate amount collected exceeds INR 50 Lakhs but is less than INR 1 Crore 10%
Aggregate amount collected exceeds INR 1 Crore but is less than INR 2 Crore 15%
Aggregate amount collected exceeds INR 2 Crore but is less than INR 5 Crore 25%
Aggregate amount collected exceeds INR 5 Crore 37%
Non-resident co-operative society or a firm Aggregate amount collected exceeds INR 1 Crore 12%
Company other than the domestic company Aggregate amount collected exceeds INR 1 Crore but is less than INR 10 Crores 2%
Aggregate amount collected exceeds INR 10 Crore 5%

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 –

Sr. No. Months Due date
1 April 7th May
2 May 7th June
3 June 7th July
4 July 7th August
5 August 7th September
6 September 7th October
7 October 7th November
8 November 7th December
9 December 7th January
10 January 7th February
11 February 7th March
12 March 7th April

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 –

Sr. No. Quarter Due date
1 April to June 15th July
2 July to September 15th October
3 October to December 15th January
4 January to March 15th May

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 –

Sr. No. Quarter Due date
1 April to June 30th July
2 July to September 30th October
3 October to December 30th January
4 January to March 30th May

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.

Also Read-

Particulars
TDS Rate Chart for Financial Year 2019-2020
Section 192 – TDS on Salary
Section 192A – TDS on Premature withdrawal from EPF
Section 193: TDS on Interest on Securities
Section 194 – TDS on dividend
Section 194A: TDS on interest other than interest on securities
Section 194B and Section 194BB – TDS
Section 194C – TDS on Contractors
Section 194D – TDS on insurance commission
Section 194DA – TDS in respect of Life Insurance Policy
Section 194E – TDS on payment to Non-resident Sportsmen or Sports Association
TDS under Section 194EE and Section 194F
Section 194G TDS on Commission on Sale of Lottery Tickets
Section 194H – TDS on Commission or Brokerage
Section 194I of Income Tax Act, 1961 – TDS on Rent
Section 194IA TDS on transfer of immovable property
Section 194IB – TDS on Rent paid by Individual / HUF
Section 194LA: Payment of Compensation on acquisition of certain immovable property
TDS under Section 194LB, 194LBA, 194LBB and 194LBC
Section 194LC: TDS on income by way of interest from an Indian Company or a business trust
Section 194LD TDS on income by way of interest on certain bonds and Government Securities
Section 194J TDS on Fees for Professional or Technical Services
Section 194N – TDS on Cash Withdrawals
Section 194M: TDS on Payment of certain sum by certain Individual / HUF
Section 195 TDS on payment of any other sum to a non-resident
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