What is Tax Collected at Source (TCS)?

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.

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:

• The Central Government
• A State Government
• A Local Authority
• A Statutory Corporation or Authority
• A Company Registered Under the Companies Act.
• A Partnership Firm
• A Cooperative Society
• An Individual or HUF (Hindu Undivided Family) subjected to an Audit of Accounts under the Income Tax Act for a particular FY. 

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:

• The Central Government
• A State Government
• Public Sector Companies
• The Embassy of High Commission
• A Foreign Nation’s Consulate or Any Other Trade Representations
• Clubs like Sports Clubs and Social Clubs
• Where Resident Buyer utilizes such purchase for the purposes of manufacturing, processing or producing articles/things or for the purposes of generating power (not for trading) and gives this declaration in writing.

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. 

Author: Dushyant Sharma

Hey there, I'm Dushyant Sharma. With the extensive knowledge I've gained in past 8 years, I have been creating content on various subjects such as banking, insurance, telecom, and all the important registration and licensing processes for various companies. I'm here to help everyone with my expertise in these areas through my articles.