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.
In this article
- What is Tax Collected at Source?
- Seller Classifications of TCS
- Buyer Classifications of TCS
- The Goods Covered under TCS
- Each type of products has a separate rate of TCS tax collected at source
- TCS Return Due Dates
- Certificate of Tax Collected at Source
- TCS Exemptions
- Total Tax Exemptions
- TCS on Gold
- Difference Between TDS and TCS
- Tax Collected at Source – FAQs
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, let’s 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.
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
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 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.
Each type of products has a separate rate of TCS tax collected at source
|Type of Good||Rate of TCS|
|Liquor of alcoholic nature, made for consumption by humans||1.00%|
|Minerals like lignite, coal, and iron ore||1.00%|
|Bullion that exceeds over Rs. 2 lakhs/ Jewellery that exceeds over Rs. 5 lakhs||1.00%|
|Purchase of Motor vehicle exceeding Rs. 10 Lakhs||1.00%|
|Parking lot, Toll Plaza and Mining and Quarrying||2.00%|
|Timber wood under a forest leased||2.50%|
|Timber wood by any other mode than forest leased||2.50%|
|A forest produce other than Tendu leaves and timber||2.50%|
TCS Return Due Dates
|Quarter||Period||Due Date of Filing|
|First Quarter||1st April to 30th June||March 31st, 2021|
|Second Quarter||1st July to 30th September||March 31st, 2021|
|Third Quarter||1st October to 31st December||Jan 15th, 2021|
|Fourth Quarter||1st January to 31st March||May 15th, 2021|
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 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 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.
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.
Tax Collected at Source – FAQs
Q1. Can TCS be refunded?
It’s not about getting a refund. Let us first clarify that TDS is not a separate levy. It’s similar to an advance tax in that you pay it when you collect it and only demand the refund as you pay the output tax. Just the net tax must be charged if the output tax obligation exceeds the TCS number.
Q2. Is the TCS collected on the GST amount?
TCS is obtained on the total selling price, like GST. The CBDT has explained that because the tax is based on the overall revenue consideration, the GST cannot be changed. For eg, if the selling price is Rs 10 lakh plus GST, the TCS must be obtained on that amount without the GST change.
Q3. Will TCS be collected on the sale of a service?
TCS should not apply to the consideration of a “selling of products.” The Income Tax Act of 1961 does not describe the word “goods.” The word “goods” has a broad meaning. TCS, on the other hand, would not apply to the selling of commodities. However, they are almost certainly liable to TDS under various provisions of the Income Tax Act of 1961.
Q4. What is TCS form?
The above amendments to the laws apply to government offices where tax has been collected to the account of the Central Government without the production of a challan along with the deposit of the tax in a bank. Form 24G must be submitted.
Q5. How is TCS exempted?
When the qualifying items are purchased for personal use. The commodities are purchased for manufacturing, refining, or production, not for trade.