What is Tax Collected at Source (TCS)?

Tax Collected at Source (TCS) is income tax collected in India payable by the seller who accumulates in turn from the buyer and it is given under section 206C of the Income Tax Act, 1961 at the sale of some special goods. The TCS Rate is distinct for each category of goods and the Rates in force have been placed within.

TCS Rates in India

Note that the interest charges for late payment of the TCS to the Government, for every month delayed is 1%.

Type of GoodsTax %
Liquor of alcoholic nature made for consumption by humans1.00%
Timber wood under a forest leased2.50%
Tendu Leaves5.00%
Timber wood by any other mode than forest leased2.50%
A forest produce other than Tendu leaves and timber2.50%
Parking lot, Toll Plaza and Mining and Quarrying2.00%
Minerals like lignite, coal, and iron ore1.00%
Bullion that exceeds over Rs. 2 lakhs/ Jewellery that exceeds over Rs. 5 lakhs.1.00%
Purchase of Motor vehicle exceeding Rs. 10 Lakhs1.00%

Classification of Seller for TCS

These are the following people and organizations under tax collected at source; a seller is characterized as any of the following

  • Central Government
  • Company
  • Local Authority
  • Statutory Corporation or Authority
  • Co-operative Society
  • State Government
  • Partnership Firms

Under Section 44AB if any person or a Hindu Undivided Family (HUF) has total sales or gross receipts that surpass the specified monetary limits as mentioned in the last year.

Classification of Buyer for TCS

A Purchaser is a person who acquires goods or even the right of getting goods at a sale, auction, tender, or other modes. These are the following people and organizations who are exempted from the classification as buyers for TCS.

  • Central Government
  • State Government
  • Public Sector Entities or Companies
  • Consulate and other Trade Representation of a Foreign Nation
  • Embassy of High Commission
  • Clubs such as sports clubs and social clubs

Goods and Transactions Classified under TCS

The following are treated for collecting tax at source:

  • Timber wood obtained from a forest that has been leased
  • Timber wood by any other mode than leased
  • Liquor of alcoholic nature for human consumption containing IMFL(Indian Made Foreign Liquor)
  • Tendu Leaves
  • A forest produce other than Tendu leaves and timber
  • Scrap
  • Minerals that contain lignite, coal, or iron ore
  • Toll Plaza, Parking lot ticket, Quarrying, and Mining
  • Bullion that surpassed over Rs. 2 lakhs/Jewellery that surpassed over Rs. 5 lakhs

Certificate of TCS

Form 27D is a certificate that should be submitted within 7 days from the last date of the month in which that tax had been collected by the people or individual who is accumulating TCS.

In the period that ends on September 30 and March 31 for a financial year, there is more than one certificate to be given for a purchaser for TCS, a combined certificate can be given within 30 days from the last day of the period. This certificate has to be requested by the purchaser.

In case if the TCS certificate is missed by the person then in charge officer for the collection of TCS source can give a duplicate certificate that can be printed and attested on plain paper, along with needed details as specified in the Form 27D.

TCS Exemptions

There are two types of exemptions that contain low rated TCS and the total exemption for tax collected at source:

TCS at Lower Rate

With the help of Form No.13, a purchaser can request to the Assessing Officer for collecting the tax at the source at a lower rate to the condition that the Assessing Officer is converted that the total income of the buyer describes for a lower rate. The Officer may as well issue a certificate, that has the rate of TCS particularized with the lower rate applied.

Total Tax Exemption

This is the acknowledgment by the purchaser in form No. 27C which has to be made for the total dispensation for paying TCS. In this declaration, it has to be particularized and prove that the goods that have been asserted are planned for the reasons for the processing and manufacturing of the goods and not trading reasons. The individual or entity collecting the tax also has to be given a duplicate copy of the declaration form, after which the collector needs to present the declaration form to the suitable authorities within a week of the following day.

Electronic TCS (e-TCS)

e- TCS is the process of filing TCS returns by electronic media. Government and corporate collectors need to file TCS returns in its electronic form. Collectors (other than government) have the right to file TCS returns in physical form or electronic form.  NSDL is in fees for the collection of the e-TCS returns from the collectors on behalf of the Income Tax Department.

There are some TCS-specific form formats which should include all information for filing the TCS returns.

This includes:

  • CD-ROM with a capacity >=650 MB
  • A-DATA Cartridge which is 4mm 2GB/4GB (90M/120M)
  • 1.44 MB floppy diskette that is 3.5 Inches

The returns must be accompanied with Form No.27B and it is compulsory to get verified.

Filing of TCS Returns

TCS returns are to be filed quarterly, in addition to annual returns.

  • The quarterly returns are to be filed in Form Number 27EQ on or before  July 15, October 15, and January 15, respectively for the first three-quarters of the financial year. For the last quarter, the returns are to be filed on or before April 30.  
  • Annual returns are to be filed in Form Number 27E on or before June 30 of the following financial year.

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