Tax Collected at Source (TCS)

Tax Collected at Source (TCS)

What is TCS?

Tax Collected at Source (TCS) allows the seller to collect a specific tax amount from the buyer at the time of sale and deposit this tax with the government. The Income Tax Act, 1961, governs the provisions for TCS.

Who is Involved in TCS?

·       Seller (TCS Collector): Any entity responsible for collecting TCS, including the Central Government, State Government, companies, partnership firms, and individuals whose accounts are audited under the Income Tax Act.

·       Buyer: The individual or entity purchasing the specified goods. However, certain buyers, such as government entities and social clubs, are exempt from paying TCS.

What Goods Attract TCS?

The applicability of TCS depends on the type of goods purchased and their intended purpose:

·       Trading Purposes: TCS applies to various goods when purchased for trading, such as liquor, scrap, minerals, bullion/jewellery exceeding specific limits, motor vehicles exceeding Rs. 10 lakh, and certain forestry products.

·       Manufacturing, Processing, or Production: TCS is not applicable if the above-mentioned goods are used for manufacturing other products.

TCS Rates:

The TCS rate varies depending on the type of good:

·       Liquor (alcoholic): 1.00%

·       Scrap, minerals, and certain forestry products: 1.00%

·       Bullion/jewellery exceeding limits: 1.00%

·       Motor vehicles exceeding Rs. 10 lakh: 1.00%

·       Parking lots, toll plazas, mining, and quarrying: 2.00%

·       Timber procured through forest lease: 2.50%

·       Other timber and forest produce (except tendu leaves): 2.50%

·       Tendu leaves: 5.00%

TCS Return Filing:

TCS collected needs to be deposited with the government, and returns must be filed electronically (e-TCS) by the seller. Here are the due dates for filing TCS returns (Form 27EQ):

·       Quarter Ending | Due Date for TCS Return | Date for Generating Form 27D

·       June 30th | July 15th | July 30th

·       September 30th | October 15th | October 30th

·       December 31st | January 15th | January 30th

·       March 31st | May 15th | May 30th

TCS Certificate (Form 27D):

The seller must issue a certificate (Form 27D) to the buyer within a week of collecting TCS. This certificate details the tax deducted.

Consequences of Non-Compliance:

·       Interest: If the seller fails to collect or deposit TCS on time, interest at 1% per month is levied.

·       Penalty: Inaccurate TCS return filing attracts a penalty of Rs. 10,000 to Rs. 1,00,000 under Section 271H.

TCS Exemptions:

·       Goods purchased for personal consumption

·       Goods bought for manufacturing/processing/production (not for trading)

Key Differences Between TCS and TDS (Tax Deducted at Source):