All about TCS (Tax Collected at Source)

Tax Collection at Source, more popularly known as TCS, provisions mandate the seller to collect tax from the buyer and deposit the same to the Government. The provision of tax collection at source is contained under section 206C of the Income Tax Act, 1961 and the same are explained briefly in the current article.

Who Can Collect TCS?

1. The seller should collect tax from the buyer in addition to the value of the goods/services.
2. A buyer is a person who purchases specific goods. He is liable to pay TCS amount along with the bill amount in applicable cases.

Guidelines of section 206C:

1. Provisions of section 206C of the Income Tax Act, 1961 requires the specified seller to collect the tax from the specified buyer of the specified goods and at specified rates. The seller is liable to collect the tax at earlier of the following dates –

At the time of debiting of the account of the buyer; or

At the time of receipt of the amount from the buyer in cash / cheque / draft or any other mode.

TCS Rates for Specific Goods u/s 206C(1):

Taxes are paid only when the goods are utilized for trading purposes, and not when utilized for manufacturing, processing or producing things. The tax payable is collected by the seller at the point of sale. The rate of TCS is different for goods specified under different categories under section 206C(1):

Section 206C(1C) – TCS on Leasing, Licensing, and Mining Contracts:

A person granting lease or license for a 

1. Parking lot, 
2. Toll plaza 
3. Mine or quarry,

 should collect TCS at 2%.

Section 206C(1F) – TCS on Motor Vehicle and Luxury Goods:

• Section 206C(1F) applies to sale of
  1. Motor vehicles exceeding Rs 10 lakhs and
  2. Notified luxury items whose value exceeds Rs 10 lakhs.
• Motor vehicles refer not only to car, but to all motor vehicles (including bikes, etc.,).

Therefore, even if the value of the bikes purchased exceeds Rs 10 lakhs, TCS is applicable.

• The notified luxury items are listed below:

Section 206C(1G) – TCS on Overseas Remittance or Overseas Tour Package

Under section 206C(1G) TCS needs to be collected by

1. Authorized dealer on remittances under Liberalized Remittance Scheme
2. Seller of overseas tour package program on collecting money from the customers

at the rates applicable.

TCS Exemptions:

Tax collection at the source is exempted in the following cases:

1. If the resident buyer furnishes a declaration to the seller that “goods” are to be utilized in manufacturing or production of any article or for the purpose of generation of power.

Due date for the Deposit of TCS with the Government:

The seller who is liable to collect tax is required to deposit the same to the Government on a monthly basis in Challan 281 within the following due dates –

TCS return filing requirement:

The tax collector is required to submit TCS return quarterly in Form 27EQ. The due date for filing of the TCS return in Form 27EQ is tabulated here under –

Issuance of TCS certificate:

The TCS collector is required to issue a certificate in Form 27D within 15 days of from the due date of filing of the TCS return. The due dates for the issuance of TCS certificate in Form 27D is summarized here under –

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