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TCS: All about Tax Collected at Source

[ecis2016.org] In this guide, we will talk about tax collected at source, who should collect and deposit it and what are the implications of not depositing it within a specific timeline.

What is tax collected at source?

Tax collected at source or TCS is the tax that a seller is responsible for collecting from the buyer, on behalf of the government. The seller has to deposit this tax to the Income Tax Department within a specific time window.

Tax collected at source: How does it work?

On TCS deduction, a seller is responsible for issuing a TCS certificate to a buyer. Buyers can see the details of deducted TCS in Form 26AS.

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Sales where the seller has to deduct TCS

TCS applies to the sale of specific items specified under Section 206C of the Income Tax Act, 1961.

These include:

  1. Liquor meant for human consumption.
  2. Timber wood obtained from a leased forest area.
  3. Tendu leaves.
  4. Timber wood obtained from any mode other than leased forest area.
  5. Forest produces (other than timber and tendu leaves).
  6. Scrap.
  7. Parking lot tickets.
  8. Toll plaza.
  9. Mining and quarrying.
  10. Minerals, including iron ore, lignite and coal.
  11. Gold worth more than Rs 2 lakhs.
  12. Motor vehicles worth more than Rs 10 lakhs.

Tax collected at source: Rate list

Item TCS rate
Sale of any goods where the aggregate value exceeds Rs 50 lakhs 0.1%
Alcoholic liquor for human consumption 1%
Tendu leaves 5%
Timber obtained under a forest lease 2.5%
Timber obtained by any mode other than a forest lease 2.5%
Any other forest produce (not being timber/tendu leaves) 2.5%
Scrap 1%
Minerals – coal or lignite or iron ore 1%

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TCS on lease, licence and contract

Type of contract TCS rate
Parking lot 2%
Toll plaza 2%
Mining and quarrying 2%

TCS on sale of motor vehicle

Type of vehicle TCS rate (%)
When the value of the vehicle exceeds Rs 10 lakhs 1%

TCS to be deducted by authorised dealers for remittance outside India

Type of remittance TCS rate (%)
Money remitted is used for repayment of a loan under Section 80E or for pursuing education. If PAN details are provided 0.5%
If PAN details are not furnished 5%
Money remitted for any other purpose If PAN details are provided 5%
If PAN details are not furnished 10%

TCS collected by sellers for overseas tour package

Type TCS rate
With PAN 5%
If PAN details are not furnished 10%

Who is a buyer for TCS tax collection purposes?

For tax collected at source, anyone purchasing a TCS-specified good by way of sale, tender or auction, qualifies as a buyer. This definition, however, does not cover the following entities:

  • Central government
  • State government
  • PSBs
  • Consulates
  • Trade representations of a foreign nation
  • High commissions
  • Embassies
  • Social clubs
  • Sports clubs

Who is a seller for TCS tax collection purposes?

For tax collected at source, the following persons/entities may fall under the category of seller:

  • Individual
  • Hindu Undivided Family (HUF)
  • Central government
  • State government
  • A statutory authority
  • Local authority
  • Company
  • Co-operative society
  • Partnership firms

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TCS deposit due date

The seller has to deposit the TCS to the government within a week of collecting it from the buyer. If TCS is collected by government agencies without an income-tax challan, it has to be deposited the same day it is collected. Where TCS payment is accompanied by an income-tax challan, TCS has to be deposited on or before seven days from the end of the month in which the tax is collected.

How can TCS be deposited with the government?

TCS can be deposited by the seller either by e-payment or physically. However, TCS e-Payment is mandatory for all corporate assessees and all other assessees to whom provisions of Section 44AB of the Income Tax Act are applicable. Others can deposit the TCS physically by furnishing Challan 281 in an authorised bank branch.

Penalty on non-payment of tax collected at source

In case a seller fails to deposit the tax collected at source with the government within the specified timeline, they will face the following consequences:

Interest: A defaulter is liable to pay simple interest at the rate of 1% per month or part thereof on the TCS amount due, from the date on which the tax was collected to the date on which the tax was paid. This interest has to be paid before furnishing the quarterly statement.

Penalty: A defaulter is liable to pay a penalty equal to the amount of tax under Section 271CA.

Prosecution: A defaulter can also face rigorous imprisonment ranging from three months to seven years, along with a fine.

FAQs

What is TCS full form?

Tax Collected at Source is the full form of TCS.

What is TCS tax?

TCS is short for tax collected at source. This tax must be deducted by a seller on the sale of specific items.

What is the difference between TDS and TCS?

TDS is tax deducted at source. It is collected by buyers on behalf of the government, on purchase of specific items. The buyer then deposits this amount with the government within a limited time window. On the other hand, TCS is tax collected at source where the responsibility to deduct and deposit the tax lies with the seller of specified items.

Source: https://ecis2016.org/.
Copyright belongs to: ecis2016.org

Debora Berti

Università degli Studi di Firenze, IT

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