In this post, we will look into Tax collected at source (TCS), meaning, and other TCS related concepts.
We will cover the following topics in this post:
- What is Tax collected at source (TCS)?
- The List of Goods as per Section 206C
- How is different from TDS?
- TCS Payment
- Penalty for not deducting and paying TCS
- TCS Return & TCS certificate
- Exemptions in TCS
What is Tax collected at source (TCS)?
Tax collected at source (TCS) is the tax a seller should pay which he collects from the buyer at the time of sale. Section 206C under the IT act gives a list of goods on which the seller has to collect tax from the purchasers. The seller will remit the tax amount to the government account.
Who is a “Seller” in TCS?
The following is the list of entities who are under sellers for TCS:
- Central Government
- State Government
- Local Authority
- Statutory Corporation or Authority
- Partnership Firms
- Co-operative Society
- Any person/HUF who has total sales/gross receipts that exceed the monetary restrictions as mentioned under Section 44AB in the last year.
Who is a “Buyer” in TCS?
A buyer is an individual/single entity that obtains goods or has the right of receiving goods at a sale, tender, auction, or other modes.
The list of entities who are exempted from the classification as buyers for TCS:
- Public Sector Entities or 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 and Transactions Classified under TCS
The List of Goods as per Section 206C
- Liquor of alcoholic nature, made for consumption by humans
- Timber wood when collected from a forest that has been leased
- Tendu Leaves
- Timber wood when not collected from a forest that has been leased, but any other mode
- A forest product other than tendu leaves and timber
- Toll Plaza, Parking lot ticket, Quarrying, and Mining
- Minerals that include lignite or coal or iron ore
- Bullion that exceeds over Rs. 2 lakhs/ Jewellery that exceeds over Rs. 5 lakhs
You can refer our blog on the TCS Rate Chart – FY 2019-20 for more information.
What is the difference between TDS and TCS?
The table below shows some major differences between TDS and TCS:
|Tax deducted at source||Tax Collected at Source|
|Under the Income Tax Department||Under the Income Tax Department|
|Deduct at the time of crediting the account of payee/ payment||The tax payable is collected by the seller at the point of sale.|
|Indirect collection of tax||Direct collection of tax|
|TDS is collected by the person making the payment.||TCS is collected by the person receiving payment.|
|EXPENSE: tax is deducted from the payment of the recipient.||INCOME: tax is collected by the seller from the buyer.|
|The tax rate is fixed by the government||The tax rate is fixed by the government|
|Specific payment is made above a certain limit of the amount||Collected on the sale of specified goods like tendu leaves, timber wood, scrap, minerals, etc.|
|TDS is a buyer end activity.||TCS is a seller end activity|
|The deductor issues a TDS certificate(Form 16, 16B) to the deductee.||Tax collector issues a TCS certificate (Form No. 27D) to the Buyer (or lessee or licensee)|
- The tax collected is paid to the Central Government within 1 week of the last day of the month in which the tax is collected.
- The payment can be made in any branch of the Reserve Bank of India (RBI), State Bank of India (SBI), or any other authorized bank. The payment is to be made along with the income tax challan 281.
- All sums collected by an office should be deposited on the same day of collection if tax is paid along with the income tax challan.
Penalty for not deducting and paying TCS
- If the tax collector does not collect the tax or after collecting doesn’t pay it to the government before the due dates, then he is liable to pay interest of I % per month or a part of the month.
- He is liable for penalty u/s 271C of the Act amount of which would be equal to the amount of tax liable to be collected.
- He is liable to prosecution u/s 276BB of the Act, which is up to 7 years of imprisonment.
For more official information refer Here.
TCS Return & TCS certificate
Collectors should mandatorily furnish Quarterly TCS returns online with CPC-TDS in Form No. 27EQ in electronic form in time.
The collector can also file a correction statement to rectify any mistake or add/delete or update any information. TCS certificate is to be issued by the collector to the buyer in Form 27D.
- If there are more than one TCS certificates to be issued for a buyer, then a consolidated certificate can be issued within a month from the last day of the period.
- If the TCS certificate is lost then the entity in charge of the collection of TCS can issue a duplicate certificate that can be printed and attested on plain paper, along with required details as mentioned in Form 27D.
The due dates for TCS quarterly returns and issue of TCS certificates are:
|Quarter of F.Y ending||Due Date for Form 27EQ||Due date of issue of TCS certificate in 27D|
|30th June||15th July of the FY||30th July|
|30th September||15th October of the FY||30th October|
|31st December||15th Jan of the FY||30th January|
|31st March||15th May of the FY immediately following the FY in which the collection is made||30th May|
- For the 1st and 2nd Quarter of FY 2020-21, the due date is extended till March 31st, 2021.
- TCS return filling after the due date will have a Late Filing Fee of Rs.200/- per day for the failure period.
- Failure to furnish a certificate will have a penalty of Rs.100/- for every day of failure.
Exemptions in TCS
There are two types of exemptions as mentioned below:
- TCS at Lower Rate: The buyer can apply to the Assessing Officer(AO) for collecting the TCS at a lower rate with Form 13. If AO has been convinced that the buyer’s total income is justifiable for the lower rate. The AO can issue a certificate that has the TCS rate specified with the lower rate applied.
- Total Tax Exemption: The buyer has to declare in Form 27C that he is eligible for total exemption from paying TCS. The declaration has to specify and prove that the goods are only for processing and manufacturing and not trading. The person collecting the tax has to be given a duplicate copy, then the collector will then submit this form to the authorities within a week of the following day.
With that, we have come to the end of this post on Tax collected at source.