What is Tax Collected At Source (TCS)?

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:

  1. At the time of debiting the amount payable by the buyer or
  2. At the time of receipt of such amount from buyer, whichever is earlier.
As per section 206CCA, if the aggregate of TDS and TCS for collectee is INR 50000 or more in each of these two previous years and collectee has not filed the returns of income for two previous years immediately prior to the previous year in which tax is required to be collected then he would suffer deduction at higher of the rates of deduction as below: At twice the rate or rates in force; or At the rate of 5%
Tip
As per section 206CCA, if the aggregate of TDS and TCS for collectee is INR 50000 or more in each of these two previous years and collectee has not filed the returns of income for two previous years immediately prior to the previous year in which tax is required to be collected then he would suffer deduction at higher of the rates of deduction as below: At twice the rate or rates in force; or At the rate of 5%

Below is the list of specific goods on which TCS is applicable:

Section 206C(1)

SR No Item Description Rate if PAN Available Rate if PAN not Available with Resident / Resident who has not filed a return in last 2 AYs
1 Alcoholic Liquor for human consumption 1.00% 5.00%
2 Timber wood obtained under a forest lease 2.50% 5.00%
3 Tendu leaves 5.00% 10.00%
4 Timber wood obtained by any mode other than forest leased 2.50% 5.00%
5 A forest produce other than Tendu leaves and timber 2.50% 5.00%
6 Scrap 1.00% 5.00%
7 Minerals, being coal or lignite or iron ore 1.00% 5.00%

Notes

  • TCS has to be collected if the seller being individual or HUF is having turnover > INR 1 Cr for business or turnover > INR 50L for the profession. However, if the seller is a Public sector company, Central Government, State Government, and an embassy, High Commission, Legation, commission, Consulate and the trade representation, of a foreign State and a club or a person who purchased goods for personal consumption there is no such condition which means they always need to collect TCS on sale of specified items
  • Seller also includes:
    • Central Government
    • State Government
    • Local Authority
    • Corporation
    • Company or
    • Firm or
    • Co-Operative society 
  • The buyer does not include:
    • Public sector company, Central Government, State Government, and an embassy, High Commission, Legation, commission, Consulate, and the trade representation, of a foreign State and a club or a person who purchased goods for personal consumption

Section 206(1C)

SR No Item Description Rate if PAN Available Rate if PAN not Available with Resident / Resident who has not filed return in last 2 AYs
1 Parking lot and Toll Plaza 2.00% 5.00%
2 Mining and Quarrying (Except mineral oil like petroleum and natural gas) 2.00% 5.00%

Section 206C(1F)

SR No Item Description Rate if PAN Available Rate if PAN not Available with Resident / Resident who has not filed a return in last 2 AYs
1 Purchase of Motor vehicle exceeding Rs. 10 Lakhs 1.00% 5.00%

Notes

  • TCS has to be collected if the seller being individual or HUF is having a turnover of individual/HUF business > INR 1 Cr or profession > INR 50L
  • The seller also includes
    • Central Government
    • State Government
    • Local Authority
    • Corporation
    • Company
    • Firm
    • Co-Operative society 
  • Buyer does not include Public sector company, Central Government, State Government, and an embassy, High Commission, Legation, commission, Consulate and the trade representation, of a foreign State and a club

Section 206C(1H)

SR No Item Description Rate if PAN Available Rate if PAN not Available with Resident / Resident who has not filed a return in last 2 AYs
1 Sale of goods (except exports and those mentioned In sub-section (1) and (1F) 0.10% 1.00%

Notes

  • TCS has to be collected if the seller being individual or HUF is having a turnover of more than INR 10 crores in PY
  • The buyer must deposit the TCS if the purchasing value of the goods is greater than INR 50L in a year
  • The buyer does not Include Central Government, State Government, and an embassy, High Commission, Legation, commission, Consulate and the trade representation, of a foreign State or local authority or a person who is importing goods in India

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:

  1. The Central and State Government
  2. Local authority
  3. Statutory corporation or Authority
  4. Company
  5. Partnership Firm
  6. Co-operative society
  7. 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:

  1. Public sector company,
  2. Central/State Government
  3. Embassy, a High Commission, legation, consulate and the trade representation of a foreign state
  4. A Club
  5. 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.

FAQs

1. What is TCS certificate?

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.

2. How to retrieve lost TCS Certificate??

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.

3. How to file TCS Return?

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.

4. IS TCS applicable in case of purchase of Jewellery?

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.

5. Is TCS applicable on purchase of second hand car?

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.

Got Questions? Ask Away!

  1. Hey @ViraajAhuja47

    TDS and TCS both come under Income Tax.

    TDS: Tax Deducted at Source

    TDS is a taxation method, where a person making a payment of specific nature is liable to deduct tax and deposit it with the government.

    The rate at which TDS is deducted and paid is based on the specified based on nature of the payment.

    The person making the payment is required to make deduct and deposit the TDS.

    TCS: Tax Collected at Source

    TCS is collected by the seller from the buyer at the time of sale made. Sellers selling any specified item are liable to collect tax at a predefined rate from the buyer the time of making a sale. This TCS collected has to be deposited by the seller with the government.

    Hope this helps!