TCS or Tax Collected at Source refers to the tax payable by the seller to the government, but is collected from the buyer.
Transactions involving specific goods, including alcohol, timber, minerals, and motor vehicles are liable for TCS.
Tax Collected at Source [TCS]
TCS which stands for Tax Collected at Source refers to the tax payable by the seller to the government, but is collected from the buyer. This system primarily targets business and trading transactions and helps in tracking and managing tax liabilities effectively.
What is Tax Collected at Source
Sellers collect TCS or Tax Collected at Source from buyers at the time of sale. It should be noted that TCS is applicable on the sale of specific goods such as timber, scrap, mineral wood and more, excluding production or manufacturing materials. When a seller sells such goods to a buyer, they collect a certain percentage of tax from the buyer and remit it to the government.
Let’s say Mr. Vivek sold goods worth Rs 200 on which 1% TCS is applicable. So he will collect Rs. 202 from the buyer and return Rs. 2 to the government with the stipulated period.
TCS Applicability
As a seller, it’s important to know if you are subject to TCS obligations. If your business comes under any of the following, you are subject to TCS
Seller Classifications of TCS
- Central Government
- State Government
- Local Authority
- Statutory Corporation or Authority
- Company registered under the Companies Act
- Partnership firms
- Co-operative Society
- Any person or HUF whose accounts are being audited under the Income Tax Act for a specific financial year
Buyer Classifications of TCS
The following buyers are liable to pay the tax at source to the seller:
- Public sector companies
- Central Government
- State Government
- Embassy of High Commission
- Consulate and other Trade Representation of a Foreign Nation
- Clubs such as sports clubs and social clubs
Goods Covered under Tax Collected at Source (TCS)
TCS is applicable to many sectors. Transactions involving specific goods, including alcohol, timber, minerals, and motor vehicles are liable for TCS. The tax percentage depends on the type of commodities and the specific regulations mentioned in the Income Tax Act.
Type of Goods and Rate of TCS
Here’s a look at type of goods and their TCS rate:
| Type of Goods | Rate of TCS |
|---|---|
| Liquor of alcoholic nature, made for consumption by humans | 1% |
| Scrap | 1% |
| Minerals like lignite, coal, and iron ore | 1% |
| Bullion that exceeds over Rs. 2 lakhs/ Jewellery that exceeds over Rs. 5 lakhs | 1% |
| Purchase of Motor vehicle exceeding Rs. 10 Lakhs | 1% |
| Purchase of Motor vehicle exceeding Rs. 10 Lakhs | 2% |
| Timber wood under a forest leased | 2.5% |
| Timber wood by any other mode than forest leased | 2.5% |
| A forest produce other than Tendu leaves and timber | 2.5% |
| Tendu Leaves | 5% |
TCS Return Due Dates
| Quarter Ending | Due date to file TCS return in Form 27EQ | Date for Generating Form 27D |
|---|---|---|
| 30th June | 15th July | 30th July |
| 30th September | 15th October | 30th October |
| 31st December | 15th January | 30th January |
| 31st March | 15th May | 30th May |
Certificate of Tax Collected at Source
When a tax collector files his quarterly TCS return which is Form 27EQ, he has to provide a TCS certificate to the purchaser of the goods. Form 27D is the certificate issued for TCS returns filed. The certificate contains the following details:
- Name of the seller and buyer
- TAN of the seller i.e. who is filing the TCS return quarterly
- PAN of both seller and buyer
- Total tax collected by the seller
- Date of collection
- The rate of tax applied
Interest Chargeable on Non-payment
If the seller who is accountable to collect the tax and give it to the government fails to do so, he/she is liable to pay interest at 1% per month or part thereof.
Penalty for Incorrect Filing of the TCS Return
A penalty can be levied if the tax collector files an inaccurate TCS return under section 271H. Additionally, a minimum penalty of Rs 10,000 and a maximum penalty of up to Rs 1,00,000 can be levied if the collector files a wrong TCS return.
TCS Exemptions
When the eligible goods are utilised completely for personal consumption, TCS is exempted. It is also exempted when the purchaser buys the goods for manufacturing, processing or production and not for trading.
e-TCS
As the name suggests, the method of filing TCS returns by electronic media is referred to as e-TCS. Government and corporate collectors are required to file TCS returns in electronic format beginning with the 2004-2005 fiscal year. Other collectors can file the TCS returns in either paper or electronic format.
Difference Between TDS and TCS
Tax Deducted at Source (TDS) is the amount deducted from a taxpayer’s salary by another taxpayer. It is then compensated to the central government. It is tax deducted at source like salaries, rents etc. On the other hand, TCS (Tax Collected at Source) applies to the selling of specific products like scrap, wood, tendu leaves, minerals, and other similar products. It is collected by the seller from the buyer and paid to the government.
FAQs
TCS is mainly used for boosting society, infrastructural development, education, and many more sectors. It also helps avoid tax evasion.
Yes, sellers have the option of filing TCS returns electronically.
Yes. If the amount of Tax Collected at Source exceeds your tax liability, you can ask for a refund through the income return filing process.
Inaccurate TCS returns may result in fines under Section 271H of the Income Tax Act. The fines can range from from Rs 10,000 to Rs 1,00,000.
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