Tax Collected at Source

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Tax Collected at Source ( TCS ) Payment, Exemption and Rates

Tax Collected at Source is what a seller collects from the buyer while selling a specified category of goods. The Tax Collected at Source (TCS) varies for all the category of goods. TCS that a seller collects from the buyer needs to be deposited with the government. All the goods on which the seller levies tax from the buyer are governed under the purview of the Sec. 206C of the Income-tax act.

TCS Rates in India

Here is a list of the Goods that are covered under TCS provisions and the rates that are applicable to them:  

Taxes are applicable when the below-mentioned goods are used for trading purposes. And if they are not utilized for processing, manufacturing, or producing things, then these taxes are not payable. The seller collects the tax due at the point of sale.

The Tax Collected at Source is different for goods as listed under different categories.

Type of Goods

Rate

Liquor/alcohol for human consumption

1%

Timber wood bought under a forest lease

2.5%

Tendu leaves

5%

A forest produce ( apart from Tendu leaves & Timber)

2.5%

Timber wood other than forest lease

2.5%

Scrap

1%

Bullion above Rs. 2 lakh/ Jewelry above Rs. 5 lakh

1%

Parking lot, Quarrying, Toll Plaza and Mining

2%

Minerals such as coal, lignite, and iron ore

1%

Purchase of cars above Rs. 10 Lakh

1%

Cash purchases above Rs. 2 lakh

1%


Here is an illustration to help you understand the concept of TCS. For instance: Mr. X purchases Scrap worth Rs. 2000 from Mr. Y. In this case, Mr. X will pay Rs. 2020 to Mr. Y (2000 for Scrap and 1% of Rs. 2000 i.e. Rs. 20 as TCS). Mr. Y would need to deposit the TCS collected with the Government.

Classification of Buyers and Sellers for TCS

The sellers pertaining to the organizations and people that are eligible to collect tax at source are listed below:

  1. State Government
  2. Central Government
  3. Local Authority
  4. Partnership firms
  5. Companies registered under the Companies Act
  6. Statutory Corporation or Authority
  7. Co-operative Society
  8. Any HUF or person who is eligible for an audit of his accounts under the Income-tax act during a fiscal year.

Similarly, there are specific buyers who are liable to pay the TCS to the sellers.

Here is a list of the buyers:

  1. State Government
  2. Embassy of High Commission
  3. Public sector companies
  4. Central Government
  5. Trade Representation of a Foreign Nation
  6. Consulates
  7. Sports clubs/social clubs

TCS Payments & Returns

The table below mentions the dates for Payment of TCS to the government:

Collection Month

Quarter Ending

Payment Due date

Due Date of filing ITR

April

June 30

May 7

July 15

May

June 7

June

July 7

July

September 30

August 7

October 15

August

September 7

September

October 7

October

December 31

November 7

January 15

November

December 7

December

January 7

January

March 31

February 7

 March 15

February

March 7

March

April 7


*All the amount that the Government Office Collects has to be deposited on the same day.

TCS Return Filing

There are specific guidelines pertaining to the submission of TCS.

  • At the end of the month in which the tax was collected the seller deposits the Tax Collected at Source in Challan 281. This has to be done within 7 days from the last of the tax collection month.
  • In case the tax collector fails to deposit the tax collected to the government as per the above-mentioned due dates, he shall be liable to pay 1% interest for the complete month or a part of the month.
  • The tax collector is required to submit TCS return in the Form 27EQfor the tax collected in a particular quarter.
  • Once the TCS return is filed Form 27D ( certificate) is issued
  • In case of delay in TCS payment, the depositor needs to pay the interest to the government before the filing of the Income-tax return.

What is TCS Certificate?

When the tax collector files quarterly TCS return, he also needs to handover a TCS certificate to the buyer of the goods. And Form 27D is the certificate that is issued upon the filing of the TCS returns. The following information is mentioned in this certificate:

  • Buyer and Seller’s Name
  • Permanent Account Number(PAN) of both the buyer and the seller
  • Seller’s Tax Deduction and Collection Account (TAN) i.e. seller who has filed the TCS return quarterly
  • Date of Collection
  • Total Tax Collected by the Seller
  • Applicable Tax Rate

This certificate is issued within 15 days of filing quarterly returns of the Tax Collected at Source. And the table below mentions the due dates:

Quarter Ending

Date for Generating Form 27D

31st March

June 15

30th June

August 15

30th September

November 15

31st December

February 15

Exemptions under Tax Collected at Source (TCS)

Tax Collected at Source is exempted under the following circumstances:

  1. When the purchase of the goods is for personal use.
  2. If the goods are purchased for processing, manufacturing, or production instead of trading purpose.

Tax Collected at Source under GST

  1. For online transactions, the traders or dealer selling goods online would be paid by the online platform after subtracting the tax @ 1 % under IGST Act. 0.5% in SGST and 0.5% in CGST).
  2. It is mandatory for all the traders/ dealers to be registered under GST.
  3. The taxable amount needs to be credited to the government maximum by 10th of the subsequent month.

Note: These provisions are w.e.f.  Oct 1st, 2018

For instance: Mr. X (seller) is a trader who sells kitchenware on an online platform (buyer).  He gets an order worth Rs. 5, 000 (including the tax and commission). In this case, the online platform would deduct tax worth Rs. 50 (1% of Rs. 5000).

 FAQs on Tax Collected at Source

Question 1. What is Tax Collection at Source?

Answer: Tax Collected at Source implies the collection of tax by the seller for selling certain specific goods to a buyer for a specific purpose. The tax applicable is under the purview of the Sec. 206C of IT Act, 1961. The amount that is collected is termed as the Tax Collected at Source (TCS).

Question 2.  What is the rate of Tax Collection at Source?

Answer: TCS is applicable at the rate of 0.5% under the SGST and the CGST Act, 2017. And it is 1% under the IGST Act, 2017. The government has issued several notifications in this regard.

Question 3. Is it necessary for every e-commerce operator to collect tax on behalf of the seller?

Answer: Yes, it is mandatory for every e-commerce operator to collect tax from all sellers who are supplying goods or services through their e-commerce platform.

Question 4. Is TCS applicable to exempt goods?

Answer:  No, Tax Collected at Source is not applicable to exempt goods.

Question 5. Tax Collected at Source is applicable to import of goods/services?

Answer:  Tax Collected at Source is applicable to all the goods on which the receiver is liable to pay tax on reverse charge basis. The same applies to the Customs Act, 1962. If it is beyond the scope of TCS, then it will not be applicable on import of good or services.

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