Tax Collected at Source (TCS) is a mechanism under the Indian Income Tax Act, 1961, where the seller collects tax from the buyer at the time of sale of specified goods and services. This tax is then remitted to the government, ensuring tax compliance and reducing evasion.
What is TCS?
TCS stands for Tax Collected at Source. It is the tax that a seller collects from the buyer at the time of sale of certain specified goods and services. The seller is responsible for collecting this tax and depositing it with the government.
Applicability of TCS
TCS is applicable to the sale of specific goods and services as outlined in Section 206C of the Income Tax Act. The seller must collect TCS from the buyer if the transaction involves:
- Alcoholic liquor for human consumption
- Tendu leaves
- Timber obtained under a forest lease
- Timber obtained by any other mode
- Any other forest produce not being timber or tendu leaves
- Scrap
- Minerals like lignite, coal, and iron ore
- Sale of motor vehicles exceeding ₹10 lakhs
- Sale of goods exceeding ₹50 lakhs in a financial year (Section 206C(1H))
- Foreign remittance under the Liberalised Remittance Scheme (LRS)
TCS Rates
The rates of TCS vary depending on the nature of the goods or services:
- Alcoholic liquor for human consumption: 1%
- Tendu leaves: 5%
- Timber obtained under a forest lease: 2.5%
- Timber obtained by any other mode: 2.5%
- Any other forest produce not being timber or tendu leaves: 2.5%
- Scrap: 1%
- Minerals like lignite, coal, and iron ore: 1%
- Sale of motor vehicles exceeding ₹10 lakhs: 1%
- Sale of goods exceeding ₹50 lakhs in a financial year: 0.1%
- Foreign remittance under LRS: 5% (above ₹7 lakhs), 0.5% (for education loans), 20% (for other purposes)
Due Dates for TCS Payment and Return Filing
Sellers collecting TCS must deposit it with the government and file returns within specified timelines:
- TCS Payment: By the 7th day of the following month in which the tax was collected.
- TCS Return Filing (Form 27EQ):
- April to June: 15th July
- July to September: 15th October
- October to December: 15th January
- January to March: 15th May
- TCS Certificate (Form 27D): Must be issued within 15 days from the due date of filing the TCS return.
Penalties for Non-Compliance
Failure to collect or deposit TCS, or to file returns on time, can result in:
- Interest: 1% per month or part thereof on the amount of TCS not collected or deposited.
- Late Filing Fee: ₹200 per day for the period of delay in filing TCS returns, subject to a maximum of the TCS amount.
- Penalty: An amount equal to the TCS not collected or deposited may be levied.
Exemptions from TCS
TCS is not applicable in certain cases, including:
- When the buyer is the Central or State Government, an embassy, a High Commission, consulate, or other notified institutions.
- When the goods are purchased for personal consumption and a declaration in Form 27C is furnished by the buyer.
- When the buyer purchases goods for manufacturing, processing, or producing articles or things and not for trading purposes, and furnishes a declaration in Form 27C.
Claiming TCS Credit
Buyers can claim the TCS amount as a credit against their tax liability while filing their income tax returns. The TCS details are reflected in Form 26AS, which can be accessed through the income tax portal.
Difference Between TDS and TCS
| Aspect | TDS (Tax Deducted at Source) | TCS (Tax Collected at Source) |
|---|---|---|
| Collected by | Buyer/Payer | Seller |
| Applicable on | Payments like salary, rent | Sale of specified goods |
| Time of deduction | At the time of payment | At the time of sale |
| Responsible to deposit | Buyer/Payer | Seller |
Conclusion
Understanding TCS is crucial for both buyers and sellers involved in specified transactions. Compliance with TCS provisions ensures smooth business operations and avoids penalties. Always stay updated with the latest tax regulations and consult a tax professional for specific guidance.
