TCS Filing

Indian Income Tax Act has provisions for tax collection at source or TCS. In these provisions, certain persons are required to collect a specified percentage of tax from their buyers on exceptional transactions. Most of these transactions are trading or business in nature. It does not affect the common man. Read on to know more!

Latest updates

Tax collection at source (TCS) for foreign remittances under LRS was raised from 5% to 20% in Budget 2023. Except for education and medical reasons, this will extend to international travel, sending money abroad, and other remittances. This new rule will take force on July 1, 2023.

What is Tax Collected at Source (TCS)?

Tax collected at source (TCS) is the tax collected by the seller from the buyer on sale so that it can be deposited with the tax authorities. Section 206C of the Income-tax act governs the goods on which the seller has to collect tax from the buyers. Such persons must have the Tax Collection Account Number to be able to collect TCS.

Example: If a box of chocolates costs Rs.100, the buyer pays Rs.20 (Rs 80 + Rs 20), which is the tax collected at the point of sale. The funds are then transferred to a certain approved branch of a bank that has been authorised to accept payments. The seller is only responsible for collecting this tax from the customer and is not liable for paying it himself or herself. The tax is intended to be collected while selling items, conducting transactions, receiving a payment in cash from the buyer, or issuing a cheque or draft, whichever method is paid first.

Section 206C of the Income Tax Act of 1961 has this provision.

Goods covered under TCS provisions and rates applicable to them

When the below-mentioned goods are utilised for the purpose of manufacturing, processing, or producing things, the taxes are not payable. If the same goods are utilised for trading purposes, then tax is payable. 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 :

Type of Goods or transactions Rate
Liquor of alcoholic nature, made for consumption by humans 1%
Timber wood under a forest leased 2.5%
Tendu leaves 5%
Timber wood by any other mode than forest leased 2.5%
Forest produce other than Tendu leaves and timber 2.5%
Scrap 1%
Minerals like lignite, coal and iron ore 1%
Purchase of Motor vehicle exceeding Rs.10 lakh 1%
Parking lot, Toll Plaza and Mining and Quarrying 2%
Where total turnover is more than Rs.10 crore in the previous financial year and receives sale consideration of any products of more than Rs.50 lakh, such seller must collect TCS upon receiving consideration from the buyer on such amount over and above Rs.50 lakh, as per Section 206C(IH).
(Without PAN, then 1% is TCS)		 0.1%

When will a higher TCS rate apply?

Note that as per Section 206CCA, tax at a higher rate (other than rates in the above table) will be collected from the buyer if such buyer has-

  • Not filed ITR for the last two financial years before the relevant financial year in which TCS had to be collected.
  • The time limit to file ITR has expired.
  • The total of TCS and TDS was more than Rs.50,000 in each of these two financial years.

Such a higher TCS rate will be the highest of the following two rates-

  • Two times the TCS rate mentioned in the Income Tax Act ( in the above table)
  • 5%

In special cases given under Section 206C(IG), 5% TCS applies where the authorised dealer arranges remittance out of India of Rs.7 lakhs or more in a financial year from a buyer of foreign currency remitting under Liberalized Remittance Scheme (LRS), not being the overseas tour program package. If Aadhaar or PAN is unavailable, then TCS is 10%. Such TCS is collected while debiting the buyer’s account or on receipt of money.

Classification of Seller for TCS

There are some specific people or organisations who have been classified as sellers for tax collected at the source. No other seller of goods can collect tax at source from the buyers apart from the following list:

    • Central Government
    • State Government
    • Local Authority
    • Statutory Corporation or Authority
    • Company registered under the Companies Act
    • Partnership firms
    • Co-operative Society
    • Any person or HUF who is subjected to an audit of accounts under the Income-tax Act for a particular financial year.

Classification of Buyers for TCS

A buyer is a person who obtains goods of specified nature in any sale or right to receive any such goods, by way of auction, tender or any other mode. However, the below buyers are exempted from the collection of tax at the source. In other words, TCS need not be collected from the following persons.

 

  • Public sector 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
  • Where resident buyer utilises such purchase for the purposes of manufacturing, processing or producing articles or things or for the purposes of generation of power (not for trading) and gives this declaration in writing in duplicate.

When should TCS be collected?

The seller must collect TCS at the earlier of the following two dates:

  • When debiting the money payable by the buyer to their account in the books of accounts.
  • Upon receipt of such money from the buyer in any mode such as cash issue of a cheque or draft.

In the case of the motor vehicle sale, the TCS is collected upon receipt of money or consideration for the motor vehicle from the buyer.

TCS Certificate

  1. When a tax collector files his quarterly TCS return i.e.  Form 27EQ, he has to provide a TCS certificate to the purchaser of the goods.
  2. Form 27D is the certificate issued for TCS returns filed. This certificate contains the following details:
    • Name of the Seller and Buyer
    • TAN of the seller i.e. who is filing the TCS return quarterly
    • PAN of both seller and buyer
    • Total tax collected by the seller
    • Date of collection
    • The rate of Tax applied
  3. This certificate has to be issued within 15 days from the date of filing TCS quarterly returns. All the TCS due dates are summarised in the below table:
Quarter Ending Due date to file TCS return in Form 27EQ Date for generating Form 27D
For the quarter ending on 30th June 15th July 30th July
For the quarter ending on 30th September 15th October 30th October
For the quarter ending on 31st December 15th January 30th January
For the quarter ending on 31st March 15th May 30th May

In case you are still confused about filing TCS returns, feel free to consult the tax experts at Finxurance.

Submission of Form 24G

In the case of an office of the Government, where tax has been paid to the credit of the Central Government without the production of a challan associated with the deposit of the tax in a bank, below are the changes to the rules, Form 24G has to be submitted:

 

Rules where TDS is deposited without challan (changes to Rule 30)
  • If TDS has been deposited without a challan, the person to whom TDS has been reported for depositing to the government – such a person has to submit a statement in Form 24G to the agency authorised by the Principal Director of income tax (systems). [Rule 30(4)]
  • Such Form 24G must be submitted issued within 15 days from the end of the relevant month. For the month of March, the form should be submitted by 30 April 2019
  • Form 24G must be submitted (a) electronically under digital signature (b) electronically along with verification in Form 27A (c) or verified through an electronic process as prescribed
  • A person referred to in bullet 1 shall inform the Book Identification number generated to each of the deductors for whom the sum deducted has been deposited.
  • The Principal Director General of Income Tax (Systems) shall specify the procedure for furnishing and verification of statement Form 24G.
Rules where TCS under section 206C is deposited without challan (changes to Rule 37CA)
    • If TCS has been deposited without a challan, the person to whom the collector has reported the TCS for depositing to the government – such a person will submit Form 24G to the agency authorised by the Principal Director of income tax (systems).
    • Such Form 24G must be submitted within 15 days from the end of the relevant month.
    • If Form 24G pertains to the month of March, it must be submitted on or before 30th April.
    • Form 24G must be issued:
      • Electronically under digital signature
      • Electronically along with verification in Form 27A or
      • Verified through an electronic process as prescribed
    • A person referred to in bullet 1 shall inform the Book Identification number generated to each of the deductors for whom the sum deducted has been deposited.
    • The Principal Director General of Income Tax (Systems) shall specify the procedure for furnishing and verification of statement Form 24G.
FAQs

Frequently Asks Questions

As per income tax law,​ the seller shall collect TCS from the buyer at the time of debiting the amount payable to the buyer’s account or at the time of receipt of such amount from the said buyer by any mode, whichever is earlier. So the amount debited to the buyer’s account or payment received by the seller shall be inclusive of VAT/excise/GST. Hence, one should collect the TCS inclusive of GST.
If the person fails to file the TCS return on or before the due date prescribed in the income tax law, a fee of Rs.200 per day must be paid, during which the failure continues. However, the amount of late fees shall not exceed the amount of TCS. One should deposit the late filing fees before filing the TCS return. Note that Rs. 200 per day is a late filing fee, not a penalty.
As per the Income Tax Act, if any person does not file the TCS return on or before the due date prescribed in the Income Tax Act, a fee of Rs 200 per day must be paid, during which the failure continues. However, the amount of late fees shall not exceed the amount of TCS. One should deposit the late filing fees before filing the TCS return. Note that Rs. 200 per day is a late filing fee, not a penalty.

Penalty under Section 271H can also be levied if the tax collector files an incorrect TCS return. In other words, a minimum penalty of Rs 10,000 and a maximum penalty of up to Rs 1,00,000 can be levied if the collector files an incorrect TCS return.

Yes, Form 26AS displays details of Tax Collected at Source (TCS) by a seller of specified goods when such goods were sold to you. It will display the seller’s details along with the TCS amount and the transaction on which tax was collected at the source.

The tax collected at the source is the same as the income tax revenue collected in advance by the tax department for a financial year. It is used for the upliftment of backward sections of society, education, infrastructural development of the nation, etc.
Yes, the TCS collected on a buyer’s PAN is available for adjustment just like the TCS.

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