Tax Collected at Source (TCS) is an income tax, collected by the seller of specified goods, from the buyer. TCS is a concept where a person selling specific items is liable to collect tax from a buyer at a prescribed rate and deposit the same with the Government.
Let’s take an example to understand the concept of TCS:
Ram purchases jewellery from Yash of Rs. 7,00,000. Here, as per the provisions of TCS Ram would be liable to pay Rs. 7,07,000 to Yash ( Rs. 7,00,000 for jewellery and Rs. 7,000 as TCS at the rate of 1%).
Who needs to collect TCS (Tax Collected at Source)?
Every seller of specified goods shall collect TCS from the buyer of the goods. TCS will be collected:
- At the time of debiting the amount payable by the buyer or
- At the time of receipt of such amount from buyer, whichever is earlier.
Below is the list of specific goods on which TCS is applicable:
- Alcoholic Liquor for human consumption
- Tendu leaves
- Timber obtained under a forest lease
- Timber obtained by any mode other than under a forest lease
- Any other forest produce not being timber or tendu leaves
- Minerals, being coal or lignite or iron ore
- Parking Lot, Toll Plaza, Mining and Quarrying
- Bullion if consideration exceeds Rs. 2 lakhs or Jewellery if consideration exceeds Rs. 5 lakhs. (Or on any amount received in cash)
- Sale of Cars (New and Old) when sale is above Rs. 10 lakhs.
- Sale of any goods in cash exceeding Rs. 2 lakhs.
- Providing any service (other than one on which TDS has been deducted) exceeding Rs. 2 lakhs.
Tax credit in Form 26AS would be available to the buyer. The buyer can claim this TCS at the time of filing ITR. The tax credit is only available once the seller deposits the tax to the IT Department and files the TCS Return.
Who is the seller under Tax Collected at Source (TCS)?
Below is the list of sellers under TCS:
- The Central and State Government
- Local authority
- Statutory corporation or Authority
- Partnership Firm
- Co-operative society
- Individual or Hindu undivided family(HUF) if covered under section 44AB (mandatory Audit)
The seller/collector of TCS is responsible to file TCS Return/ Statement. The seller needs to file Form 27EQ within prescribed due dates.
Who is the buyer under Tax Collected at Source (TCS)?
According to the act, the Buyer means a person who obtains in any sale, by way of auction, tender or any other mode, the specified goods or right to receive any such goods. But it does not include:
- Public sector company,
- Central/State Government
- Embassy, a High Commission, legation, consulate and the trade representation of a foreign state
- A Club
- A buyer in the retail sale of such goods purchased for personal consumption.
What is Lower Rate TCS?
The buyer of a specified product can apply to his Assessing Officer (AO) for collecting tax at a lower rate, by making an application in Form 13. AO will issue a lower rate certificate. The certificate is valid until the time it is not canceled by the AO.
Who is exempt from TCS?
- TCS is not applicable if the buyer uses it for the purpose of manufacturing, processing or production of goods/ article or thing.
- In this case buyer gives a declaration for above use in duplicate in Form 27C to the seller.
- And the seller should deliver one copy of from 27C collected from buyer to Chief Commissioner/ Commissioner of Income Tax.
It is a certificate issued by the seller collecting tax at source from the buyer. The certificate of collection of tax at source has to be submitted in Form No. 27D by the seller within a week from the last day of the month in which the tax was collected.
If an issued TCS certificate is lost, the person collecting tax at source may issue a duplicate certificate on plain paper, with necessary details as contained in Form No. 27D. The Assessing Officer (AO), before giving credit for the tax collected at source on the basis of the duplicate certificate, has to get the payment certified and obtain an Indemnity Bond from the assessee.
The seller/Collector is required to file a quarterly return in form 27EQ on or before the due date. The seller can file TCS return in following two ways:
1. Using Return Preparation Utility (RPU) provided by TIN NSDL,
2. Using online platforms like Quicko.
In case of purchase of jewellery, tax is collected by seller if the purchase amount exceeds Rs. 5 lakhs Or when any amount is paid in cash to the jeweller.
TCS is applicable on the purchase of a second-hand car if its values is above Rs. 10,00,000. TCS is applicable @ 1% on total value.