At the time of selling certain specified goods (as listed below), the seller should collect tax from the buyer and such tax is called Tax Collection at Source or TCS. It is provided in section 206C of Income Tax Act 1961. The rate of TCS to be collected has been specified for each category of goods, and such tax needs to be collected and deposited to government. The list of currently specified goods and the respective TCS rates has been produced below:
|Nature Of Goods||TCS Rate|
|Alcoholic liquor for human consumption||1%|
|Timber obtained under a Forest Lease||2.5%|
|Timber obtained by any mode other than under a Forest Lease||2.5%|
|Any other Forest produce not being Timber or Tendu leaves||2%|
|Parking lot, Toll Plaza, Mining and Quarrying||2%|
|Minerals being Coal or Lignite or Iron Ore||1%|
|Bullion if consideration exceeds Rs. 2 Lakhs or jewellery, if consideration exceeds Rs. 5 Lakhs (and any amount is received in cash)||1%|
The concept of TCS can be easily understood by the following example:
Mr. Anil buys scrap from Mr. Bimal worth Rs. 10000. In such case Mr. Bimal will collect Rs. 10100 from Mr. Anil i.e. Rs. 10000 + Rs 100 (1% of Rs. 10000) and deposit Rs. 100 to government.
However, TCS credit is available to the buyer at the time of payment of taxes computed as per Income tax slab rates prescribed. For instance in the given example Mr. Anil can claim a credit of Rs. 100 at the time of filing of annual tax return.
TCS is sometimes exempt, if:
- Goods are bought for personal consumption.
- If the buyer is a Public Sector Undertaking, State/ Central Government undertaking, Embassy/ High commission/ Consulate or trade representation of a Foreign State or Club.
- If the buyer gives Form 27C in duplicate, a copy which is then submitted to Income tax department by the seller. Form 27C can be produced in case goods are used for the purpose of manufacturing, processing or producing articles or things that are not for trading purpose.
Tax Collection at Source at lower rate
If the total income of the buyer justifies TCS at a lower rate than the buyer can apply in Form 13 to the AO (Assessing Officer) and if the AO is satisfied, will issue a certificate of lower rate as may be appropriate. The certificate of lower rate is applicable upto it is not cancelled by the AO.
Duty of person collecting TCS
The person who has collected TCS is liable to get it deposited to Govt. within due date, for this the person is liable to get a TAN. The TAN needs to be quoted on all TCS returns(Form 27Q) and the challan by which TCS is deposited with the government. The due date of depositing TCS and TCS return filing is same as due date for TDS.