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Tax Collected at Source (TCS) – Example, Under GST, Payment, Exemption & Rates

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Tax Collected at Source

What is TCS?

The TCS or Tax Collected at Source is the tax that is collected from the buyer by the seller while the purchase of some specific goods category by the buyer. This TCS rate depends on the category of the items and this tax collected from the buyer needs to be deposited to the government by the seller. In other words, TCS is a tax that is payable to the government by the seller who in turn collects from the buyer or lessee. The items which come under this tax are mentioned under the Section 206 C Income Tax Act, 1961.

Tax Collected at Source or TCS -Example

To understand this tax let us explain the process with the help of an example. If a buyer is purchasing a car that costs Rs 10.01 lakhs then an amount of Rs 10,010 would be payable as TCS. This amount would need to be submitted to a particular branch of the bank which has been given permission by the government for receiving such payments. The person who is selling those cars is only responsible for collecting the cash from the buyer and paying it to the government and he doesn’t pay anything herself or himself.

This tax needs to be collected while transactions, selling goods, issuing a receipt of cash taken from the buyer or issuing a draft or cheque whichever mode is use preferred by the buyer. So, the seller acts as a middleman between the buyer and the government. Therefore this tax is paid by the consumer rather than the businessmen. But not everything is taxed used this source rather only some of the goods are taxed. Let’s take a look at those goods mentioned below.

TCS Rate of Different Goods

Nature of Goods

TCS Rate

Human consumption alcoholic liquor

1%

Leaves of Tendu

5%

Timber which is obtained from leased forest

2.5%

Timber which is obtained from any method apart from leased forest

2.5%

The forest produce which is not tendu leaves or forest timber

2%

Scrap

1%

Mining and Quarrying, Toll Plaza, Parking Lot

2%

Iron ore or Lignite or Minerals being Coal (which is force from July 1st, 2012)

1%

Bullion if amount is greater than Rs. 2 Lakhs and jewellery, if amount is greater than Rs. 5 Lakhs (for any receipt which is paid through cash)  (which is force from July 1st, 2012)

1%

Selling of both old and new cars if the amount is greater than Rs. 10 Lakhs (which is force from June 1st, 2016)

1%

Offering any service except those payments on which the TDS is already deducted which is greater than Rs. 2 Lakhs

1%

Selling of any items for which purchase is done through cash greater than Rs. 2 Lakhs

1%

Others TCS Rates – Cess

Status

Payment Exceeds

Rates

Individuals/HUF

Non resident

Amount lying between

  1. Rs. 50 lakhs and 1 crore
  2. Rs. 1 crore and Rs. 2 crores
  3. Rs. 2 crore and Rs. 5 crore
  4. More than 5 crores

Tax Rates

  1. 10%

 

  1. 15%

 

  1. 25%

 

  1. 37%

Non Resident

Amount greater than 1 crore

  1. 12%

Society or Co-operative or firm or non-domestic company

  1. Up to 10 crore
  2. Greater than 10 crore
  1. 2%
  2. 5%

Nonpayment of TCS

One must note that if the TCS is not paid on time to the government then the seller will be charged 1% of the total amount which is not paid on the due date as a penalty which will be paid by the seller only and the buyer cannot be charged for this at no cost.

Types of sellers under TCS

The below-mentioned organization and people would be considered as sellers for the TCS:-

  • Statutory Corporation or Authority
  • Co-operative Society
  • Partnership Firms
  • Company
  • Local Authority
  • State Government
  • Central Government
  • Any HUF or person that has their total sales and/or gross receipts which is greater than fixed monetary restricts which is mentioned in Section 44AB in the previous financial year.

Types of buyers under TCS

A buyer is a person which has a single or individual entity or goods or people with the right of getting goods at any auction, tender, sale, or any other mode. The below mentioned are the organizations and people that are not considered as buyers for TCS or tax collected at source:-

  • Central Government
  • Clubs for example social clubs and sports clubs
  • Consulate
  • High Commission Embassy
  • Public Sector Entities
  • Public Sector Companies
  • State Government
  • Representation of Trade Committee of any Foreign Nation

Due Dates of TCS for the FY 2020-21

Period

Quarter

Due Date of Filing

April 1st to June 30th

First Quarter

March 31st, 2021

July 1st  to September 30th

Second Quarter

March 31st, 2021

October 1st to December 31st

Third Quarter

Jan 15th of the next financial year

January 1st to March 31st

Fourth Quarter

May 15th  of the next financial year

TCS Certificate

When any tax collector fills up any quarterly returns, they need to submit to the buyer of the goods a TCS certificate. Form 27D is also known as the TCS certificate which is given for filing TCS returns.

What does a TCS certificate have?

It has the following details:-

  • Buyer name
  • Collection Date
  • PAN or Permanent Account Number of the buyer
  • PAN or Permanent Account Number of the seller
  • Seller Name
  • TAN or Tax Deduction and Collection Account by the seller that has filed this TCS return
  • Tax rate
  • The tax which was collected

Tax Collected at Source Certificate

The certificate which one gets from TCS must be submitted under Form 27D in a week’s time from the month’s last date from which this tax has been generated by entities or people who are liable for collecting tax at source.

For the period which ends on 30th September and 31st March for any financial year, one will get more than 1 certificate which is generated for any buyer for TCS. This is a consolidated certificate that could be given in a month including the last day of that particular period. But such a certificate needs to be a buyer’s request rather than the seller’s.

If a TCS certificate gets lost the organization which is in charge of the TCS or tax collection will issue another duplicate certificate that can be attested and printed on any plain paper that will include the necessary details which are mentioned under the Form 27D.

Due date for Form 27 D

Date

Ending of the Quarter

June 15

31st March

August 15

30th June

November 15

30th September

February 15

31st December

Tax Collected at Source: Lower Rate

The buyer has a right to apply to the AO or Assessing Officer for TCS collection at a quite lower rate using Form 13 if the AO or Assessing Officer is convinced the buyer’s actual total income is justified for that lower tax rate. AO might issue a specific certificate which states the tax collection rate at the source specifying that the lower rate is applicable.

Exemptions of the TCS or Tax Collected at Source

There are certain cases under which any buyer can claim for exemption of TCS. For this, any buyer needs a Form 27C. Under this form, one should claim that they are eligible for Tax Collected at Source or TCS total exemption. The following mentioned below are the cases under which any person can claim for exemption of TCS. They are:-

  • That the person is using the goods for manufacturing and processing and not for trading. For this, the buyer needs to declare that he/she is intending to use the items as raw material.
  • They are using these goods for personal use.

So the buyer needs to submit this form and he will get back a duplicate copy of this form that needs to be submitted along with the declaration form which needs to be further given to the authorities in a week.

e-TCS or Electronic TCS

When any buyer files TCS returns using electronic media, this process of filing TCS is called e-TCS. This is compulsory for corporate and government collectors for filing TCS returns using this electronic form, from the financial year 2004-2005. These returns should be filed along with Form 27 B which needs to be verified later.

Returns and TCS Payments

The below-mentioned table states the dates for TCS Payment to the government:

Ending of Quarter

Month of Collection

ITR Due Date

Due date of Payment

June 30

April

July 15

May 7

May

June 7

June

July 7

September 30

July

October 15

August 7

August

September 7

September

October 7

December 31

October

January 15

November 7

November

December 7

December

January 7

March 31

January

 March 15

February 7

February

March 7

March

April 7

Collecting TCS

The person who is collecting the TCS needs to apply for a TAN number. The TAN number will be treated as a reference for quoting in all TCS returns and when the deposited tax collected at source or TCS is collected. The due date for both TCS and TDS to the government is the same. 

The company/entity which is deducting TCS would be required to show a TCS Return form in the mentioned format and it should also have the type of goods sold by it, its value and also its TCS Rate.

Guidelines for TCS Return Filing

Here are some of the guidelines for filing TCS returns:-

  • By the end of every month under which any TCS is generated, the seller fills up the TCS using Challan 281. It needs to be completed in a span of 7 days for the previous month’s tax.
  • One must note that if the TCS is not paid on time to the government then the seller will be charged 1% of the total amount which is not paid on the due date as a penalty which will be paid by the seller only and the buyer cannot be charged for this at no cost.
  • The tax collector or seller needs to submit this collected TCS return under Form 27EQ for the total tax which is collected in the particular quarter.
  • After the TCS is paid, the certificate or Form 27D is issued
  • For TCS payment delay, the depositor will have to pay the interest prior to filing the Income-tax return to the government.

Form 24G for TCS deposited without Challan

If one is submitting either TDS or TCS without Challen then they need to fill up Form 24G and submit it to the concerned agency.

This form needs to be submitted within 15 days by the end of that relevant month.

Provisions for TCS under GST

Some new provisions were added from Oct 1st, 2018

  • For all online transactions, the sellers working online would be given tax after deducting it at 1 % using the IGST Act.
  • It is compulsory for the buyers to get themselves registered under GST.
  • The amount should be credited by the 10th of every month to the government.

New provisions

From Oct 1st, 2020, these new provisions are applicable:-

  • Every dealer that gets Rs 7 lakhs or greater than that in any foreign currency under LRS or Liberalized Remittance Scheme needs to collect tax at 5%.
  • Every seller who gets a gross turnover greater than Rs 20 crores in the previous financial year can collect tax at 0.1%.

Tax Collected at Source FAQs:

1. For the provisions for TCS which were introduced in 2020, does it also cover overseas tour package programs?

No, it does not cover overseas tour package programs for the provisions for TCS which were introduced in 2020.

2. What is the full form of PAN?

PAN stands for Permanent Account Number.

3. Under the provision for TCS, what should the tax collector or seller do if the person does not have PAN or Aadhaar under LRS?

The tax collector or seller should collect tax at 10% if the person does not have PAN or Aadhaar under LRS under the provision for TCS.

4. State the break-up of GST of TCS

For 1% of IGST, the state gets 0.5% (SGST) while the centre also gets 0.5% (CGST).

5. Under which sections of the Income Tax Act do the provisions of LRS cover up?

This is covered up under Section 206 C(IG) (a) of the Income Tax Act, 1961.

6. Is TAN mandatory for TCS?

Yes, Tax Deduction and Collection or TAN is mandatory for TCS collection.

7. What should the tax collector or seller do if the person does not have a PAN or Aadhaar under the provisions introduced in 2020?

The tax collector or seller should collect tax at 1% if the person does not have PAN or Aadhaar.

8. Is TCS mandatory?

Yes, it is compulsory for all people to pay TCS quarterly.

9. Which sections of the Income Tax Act state the seller to collect 0.1% if he/she receives a sale of Rs 10 crores?

It is available under the Income Tax Act 1961 of Section 206 C(H) for the seller to get 0.1% if they receive a sale of Rs 10 crores in the previous financial year.

10. Can someone claim for TCS under GST?

Yes, one can claim for TCS under GST.


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