TCS is the Tax Collected at Source by the seller (collector) from the buyer/ lessee (collectee/payee). The goods are as specified under section 206C of the Income Tax Act, 1961.
For example: If purchase value of goods is Rs.10,000/-, the buyer will pay an amount of ₹ 10,000 + X (X being the value of TCS as prescribed under Income Tax Act, 1961) to the seller. The seller will deposit the Tax Collected at Source (TCS) at any of the designated branches of the authorised banks.
The seller, lessor or licensor, is responsible for the collection of tax from the buyer, lessee or licensee. The tax is collected for sale of goods, on transactions, receipt of amount from the buyer in cash or issue of cheque, draft or any other mode, whichever is earlier.
In this topic
Goods and Transaction classified under TCS
A seller is defined as any of the following under TCS:
● Central Government
● State Government
● Local Authority
● Statutory Corporation or Authority
● Company
● Partnership Firm
● Co-operative Society
Any individual/HUF whose total sales, gross receipts or turnover from the business or profession carried on by him exceeds the monetary limits specified under Clause (a) or Clause (b) of Section 44AB during the previous year.
A buyer is classified as a person who obtains goods or the right to receive goods in any sale, auction, tender or any other mode. The following are not included:
● Public Sector Companies
● Central Government
● State Government
● Embassy of High Commission, Consulate and other Trade Representation of a Foreign State
● Any Club, such as social clubs, sports clubs and the like
The person collecting tax at source in accordance with provisions of Section 206C is required to issue a certificate of collection of tax at source in Form 27D to the Buyer (or lessee or licensee) from whom the tax is collected. Such certificate shall be furnished within one month from the end of the month during which the amount is debited to the account of the buyer (or licensee or lessee) or payment is received from the buyer (or licensee or lessee).
If more than one certificate is required to be furnished to a buyer (or licensee or lessee) for the period ending 30th September or 31st March in a financial year, the person collecting the tax on request from such buyer issue a consolidated certificate in Form 27D for tax collected during whole of such period.
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 27D .
Goods and transactions classified under TCS are listed below:
● Alcoholic liquor for human consumption including Indian Made Foreign Liquor (IMFL)
● 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
● Scrap (Scrap means waste and scrap from the manufacture or mechanical working of materials which is usable as such because of breakage, cutting up, wear and tear and other reasons)
● Licensing or leasing of Parking Lot, Toll Plaza
● Mining and quarrying
TCS can be totally exempted or fixed at a lower rate under some circumstances.
A declaration by the buyer in Form Number 27C (in duplicate) has to be made for total exemption. The declaration is if the goods listed are to be used for the purpose of manufacturing or processing and not trading. A copy of the declaration has to be given to the person collecting tax.
The person collecting this declaration form has to submit the copy to the authorities concerned on or before the seventh day of the following month.
The buyer (Collectee) can apply to the Assessing Officer (AO) for a lower rate, using Form No.13, subject to the condition that the AO is convinced that the total income of the buyer (Collectee) justifies the lower rate. The AO may issue a certificate, specifying the rate of collection.
The tax collected is to be paid to the Central Government within one week of the last day of the month in which the tax was collected. This payment is made in any branch of Reserve Bank of India (RBI), State Bank of India (SBI), or any other authorized bank. The payment is made accompanied by income tax challan 281. If the tax is collected on behalf of the Government, then the amount can be paid without the income tax challan.
E-TCS is the filing of TCS returns using electronic media. It is mandatory for corporate and government collectors to furnish TCS returns in electronic form, from the financial year 2004-2005. Collectors (other than government and corporate) may file TCS returns in electronic or physical form.
NSDL collects the e-TCS returns from the Collectors on behalf of the Income Tax Department.
TCS returns filed using computers should be in TCS specific form formats and must contain all the information, details and particulars specified in such forms.
Computer media specifications are as follows (any of these):
● CD ROM of capacity 650 MB or more
● 4mm 2GB/4GB (90M/120M) DAT Cartridge
● 3.5 Inches, 1.44 MB floppy diskette.
The returns must be accompanied by Form No.27B and verified.