What is Tax Collected at Source (TCS)?

Income Tax

What is Tax Collected at Source (TCS)?

Registrationwala

Tax Collected at Source (TCS) is a tax payable by a seller which he collects from the buyers during the sale of goods. In this article, we will have an in-depth understanding about what Tax Collected at Source (TCS) is. 

Tax Collected at Source (TCS)

Tax Collected at Source, abbreviated as ‘TCS’, is a kind of tax which is supposed to be paid by the seller after he collects it from the buyers at the time of sale. TCS’ collection is done according to the provisions of Section 206C of the Income Tax Act. TCS ensures a steady collection of the taxes and allows the government to track all the high value transactions.

List of Goods on which TCS is Applicable

Under Section 206 of the Income Tax Act, the list of goods on which the seller should collect tax from buyers is mentioned. The TCS’ rate varies depending on the type and value of the goods which are sold. Here is a chart showing some common goods and the applicable tax rate on such goods.

Sections

Types of Goods Transactions

Tax Rate

206C(1)

Applicable on the Sale of the following goods:

  
 

Alcoholic liquor for human consumption

1%
 

Tendu leaves

5%
 

Timber obtained under a forest lease

2.5%
 

Timber obtained by a mode other than under a forest lease

2.5%
 

Any other forest produce not being timber/tendu leaves

2.5%
 

Scrap

1%
 

Minerals: lignite, coal, and iron ore

1%

206C(1C)

Applicable on the Permit of lease or license of the following:

  
 

Toll Plaza

2%
 

Parking Lot

2%
 

Mining and Quarrying

2%

206C(1F)

Applicable on the Motor vehicle in case the sale consideration exceeds Rs. 10 lakhs

1%

206C(1G)(a)

Applicable on the Remittance out of India under the Liberalised Remittance Scheme of RBI

5%

206C(1G)(b)

Applicable on the TCS on selling of overseas tour package

5%

206C(1H)

Applicable on the TCS on sale of any goods excluding goods on which TCS is applicable as per Section 206C (1), 206C (1F), and 206C (1G)]

0.10%

 

Who are TCS Buyers and Sellers?

Since TCS is associated with the purchase of goods, let’s start by defining who a ‘buyer’ and ‘seller’ is. 

A seller can be any of the following individuals or entities mentioned below:

A buyer is defined as a person or entity which obtains goods or the rights to receive goods in a sale or auction. The following individuals and entities can be designated as buyers:

Penalty on Failure to Collect TCS

If the seller fails to collect or deposit TCS with the government within the prescribed time limit, he can attract penalties and interest under the Income Tax Act, 1961.

A fine for non-collection of TCS might be included in the penalty, up to the TCS amount that the seller failed to collect. Moreover, a penalty for non-deposit of TCS can be levied by the government at 1% per month on the amount of TCS, which the seller was supposed to deposit but failed to.

Conclusion

Tax Collected at Source (TCS) plays an important role in the regulation of the sales of certain goods and helps the government to keep an eye over the transactions being carried out in the country. It is important for the taxpayers to understand the applicability of TCS, so that they can manage their duties effectively and stay compliant with the TCS regulations in India to avoid penalties. Need assistance related to filing your tax returns? Connect with the Tax Consultants at Registrationwala. 

 

Disclaimer: This blog post is for informational purposes only. The TCS rates are subject to change. To check the latest TCS rates applicable on goods, the readers are recommended to check the official website of the Income Tax Department. 

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