Tax Collected at Source [TCS]

TCS or Tax Paid at Source is a tax that the seller owes but that is collected by the buyer. The list of items that are listed for this reason is found in Section 206C of the Income Tax Act.

What is Tax Collected at Source?

Tax Collected at Source is the complete form of TCS. The purchaser is responsible for paying the TCS bill, which is collected from the lessee or buyer. Section 206C of the Income Tax Act of 1961 specifies the products.

To better understand the mechanism, look at an example. If a box of chocolates costs Rs. 100, the customer will pay Rs. 20 in all, with the Rs. 20 representing the tax received at the source. The money is then sent to a specific branch of a bank that has been approved to accept the payments.

The purchaser is only responsible for collecting this tax from the buyer; he or she is not responsible for paying it. The tax is intended to be collected while selling merchandise, doing purchases, issuing a cash refund from a customer, or issuing a check or draught, whichever method is paid first. The Income Tax Act of 1961, Section 206C, makes this provision.

TCS Applicability

Seller Classifications of TCS 

The sellers are known as TCs for the purpose of collecting tax at the source. TCS must be collected only by these vendors. The following is a list of those vendors:

• Central Government
• State Government
• Local Authority
• Statutory Corporation or Authority
• Company registered under the Companies Act
• Partnership firms
• Co-operative Society
• Any person or HUF whose accounts are being audited under the Income Tax Act for a specific financial year

Buyer Classifications of TCS

Just a few types of buyers, including vendors, must pay tax at source to the seller:

• 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

Penalty of TCS

You must note that: when TCS is not paid at due to the government, the seller will be charged 1% of the total amount that has not been paid on the due date as a penalty.

The Goods Covered under TCS

The items mentioned below can be used for two different purposes. The tax is determined by the reason for purchasing the products.

• Trading of Goods - Since these goods are subject to duty, TCS collected at source will apply when they are used for trading purposes. Trading simply refers to the act of purchasing items from one party and selling them to another.
• Manufacturing, processing, or producing other products - When the above-mentioned goods are used for the purpose of manufacturing, processing, or producing other goods, they are exempt from tax. As a result, no TCS is needed.

Type of Good and Rate of TCS

Each type of product has a separate rate of TCS tax collected at source:

TCS Return Due Dates

Certificate of Tax Collected at Source

This certificate must be submitted in Form 27D within a week of the last day of the month in which the tax was paid, by individuals or organizations that collect the tax at source. When there are several certificates to be released for a buyer for TCS within the term that ends on September 30 and March 31 for a financial year, a combined certificate will be issued within a month of the last day of the year. The customer would have to order this certificate.

If a TCS certificate is misplaced, the agency in charge of tax collection at the source may issue a new certificate that can be written and attested on plain paper that includes all of the relevant information from Form 27D.

TCS Exemptions

TCS at Lower Rate – With the aid of Form 13, a buyer will apply to an Assessing Officer for a lower rate of tax collection at the source, on the liable condition that the Assessing Officer is satisfied that the buyer’s gross income is justifiable for the lower rate. The Assessing Officer may also grant a certificate specifying the tax collection rate at source, with a lower rate added.

Total Tax Exemptions

The buyer must announce his eligibility for absolute exemption from TCS on a Form 27C. The declaration must state and show that the commodities proclaimed are for production and producing rather than selling. A duplicate copy of the declaration form must be sent to the individual or agency collecting the fee, and the collector must apply the declaration form to the relevant authority within a week of the following day.

e-TCS

The method of filing TCS returns by electronic media is referred to as e-TCS. Government and corporate collectors are required to file TCS returns in electronic format beginning with the 2004-2005 fiscal year. Other collectors have the option of filing TCS returns in either paper or electronic format.

The NSDL is in charge of collecting the e-TCS returns from the Income Tax Department’s collectors. Several TCS-specific type formats should provide all of the details needed to file TCS returns.

TCS on Gold

Bullion valued over Rs. 2 lakhs and jewelry valued over Rs. 5 lakhs are subject to a tax of 1% of the total value.

Difference Between TDS and TCS

• TDS is the tax withheld from a company’s payout to an employee. TDS is deducted in this case under the Income Tax Act of 1961. TCS is obtained by the vendor as the items are sold to the buyer.
• TCS applies to the selling of scrap, wood, tendu leaves, minerals, and other similar products. TDS is deducted from wages, interest, dividends, leases, professional fees, brokerage and commission, and other payments.
• When a bill reaches a certain rate, TDS is deducted, while TCS is applied regardless of the payment amount. TCS is collected at a flat rate depending on the given type of product.