Tax Collected at source

Tax Collected at Source or TCS is a direct tax implemented by the seller on the buyer of certain goods. TCS is an income tax collected according to the provisions mentioned under Section 206C of the Income Tax Act, 1961. TCS is applicable on the purchase of only certain specified goods mentioned in the Act.

Example: A, a seller, sells goods worth 10,000 rupees to B. There is 1% TCS applicable on the goods. B will pay 10,000 rupees plus 100 rupees tax. The total amount paid by B will be 10100 rupees. A will deposit the 100 rupees with the Government.

Applicability of Tax Collected at Source

Tax Collected at Source is applicable on only certain products. These products have been mentioned in the Income Tax Act, 1961 along with the rates at which such tax will be applicable.

*Scrap includes wastage from manufacture or mechanical workings of material which is unusable due to breakage, cutting up, wear or other reasons.

**The following class of buyers are exempt from TCS such as the Central Government, a State Government, an embassy, ​​a High Commission, legation, commission, consulate and the trade representation of a foreign State; local authority as defined in explanation to clause (20) of Section 10; a public sector company which is engaged in the business of carrying passengers.

TCS is also applicable when a lease or license is granted. These are the following instances when TCS is applicable in the grant of a lease or license.

*Mining and quarrying here shall not include mining and quarrying of mineral oil including petroleum and natural gas.

Who is liable to pay Tax Collected at Source?

TCS is collected from the buyer by the seller at the time ofpurchase of goods. It becomes imperative to know who classifies as a buyer and a seller for the purposes of TCS.

Buyer

For the purposes of Tax Collected at Source, “buyer” may include a person who obtains the goods mentioned in Table 1.1 and Table 1.2 by way of sale, auction, tender or any other such mode. Buyer also includes any person who has the right to receive any such goods. However, the buyer, according to the Income Tax Act, 1961, does not include:

1. A public sector company
2. The Central Government
3. A State Government
4. An embassy, ​​high commission, legation, commission, consulate and the trade representation of a foreign State
5. A club

A buyer purchasing for personal consumption.

Seller

For the purpose of Tax Collected at Source, a “seller” includes:

1. The Central Government
2. A State Government
3. Any local authority or corporation established by or under a Central, State or Provincial Act
4. Any company, firm or cooperative society
5. An individual or Hindu Undivided Family whose total sales, gross receipts or turnover from business or profession exceeds the monetary limits specified under clause (a) or clause (b) of Section 44AB in the previous year.

Exemptions from Tax Collected at Source

A buyer can be exempted from TCS in two situations.

Lower TCS rate

Where the Assessing Officer is satisfied that the total income of the buyer justifies collection of tax at a lower rate than the ones mentioned in the Table, then on application by the buyer with Form No. 13, the Assessing Officer may issue a certificate to the buyer for collection of tax at a lower rate.

Total Exemption

The buyer in declaration in Form No. 27C states that the goods are to be utilized for the purposes of manufacturing, processing or producing articles or things only and not for trading purposes.
A duplicate of this form has to be submitted to the collector who will in turn deliver in to the Chief Commissioner within the prescribed time.

Process of collection of TCS

1. TCS can be paid both online through the government portal or offline through a bank.

2. The seller after deducting the tax amount at time of sale, deposits the TCS amount with the authorities within 7 days from the last day of the month. For example, TCS for the month of January has to be submitted on or before 7 ^th of February. The seller must fill out Challan 281 to complete this process.

3. Return is filed quarterly though Form 27EQ on or before 15 ^th of July, October, January and May respectively.

4. Form 27D is a TCS certificate and must be filed by the Seller. It must contain the name of the Seller and the Buyer, TAN and PAN, total tax collected by the seller, date of collection, the rate of tax applied to it and any other particulars that may be prescribed.