TCS is the tax collected at source by the seller (collector) from the buyer and is covered u/s 206C of Income Tax Act 1961. This is a tax collecting mechanism in addition to Tax deducted at Source (TDS).The difference is that, TDS is deducted when any amount is paid out and is deducted by the person responsible for payment of the amount whereas, TCS is collected over and above the amount agreed upon and is collected by the person receiving the payment. For example: Mr. X buys scrap from Mr. Y of Rs. 10000. So here, Mr. X is liable to pay Rs.10100 to Mr. Y (Rs. 100 extra being for the TCS which is 1% on the purchase price in case of scrap).This TCS so collected by Mr. Y would be required to be deposited with the government. Mr. X can claim Rs. 100 the amount paid for TCS as a credit at the time of payment of taxes computed as per the Income Tax slab rates. And the credit so claimed by Mr. X is required to be disclosed in the Income Tax Return.
As per Section 206C, the collection of tax at source shall be made at the time of debiting the account or at the time of receipt of the amount, whichever is earlier. The mode of receipt can be in the form of cash, or cheque or draft or by any other mode. Every person being a seller of specified goods is required to collect tax at source from buyer at the prescribed rate.
Prevailing rates for TCS
|Sr. No.||Nature of goods||Percentage|
|3.||Timber obtained under a forest lease or other mode||2.5%|
|4.||Any other forest produce not being a timber or tendu leave||2.5%|
|5.||Alcoholic Liquor for human consumption||1%|
|6.||Parking Lot, toll plaza, mining and quarrying||2%|
|7.||Minerals, being coal or lignite or iron ore (applicable from July 1, 2012.||1%|
|8.||Bullion if consideration (excluding any coin / article weighting 10 grams or less) exceeds Rs. 2 Lakhs or jewellery if consideration exceeds Rs. 5 Lakhs (and any amount is received in cash) (applicable from July 1, 2012)||1%|
Full exemption: No TCS collected
The requirement of TCS is not applicable if the buyer, (provided he is resident in India) furnishes a declaration in Form 27C to the person responsible for collecting such TCS stating that the goods mentioned above are to be used for the purpose of manufacturing, processing or producing articles or things and not for trading purpose. A copy of declaration so furnished by the buyer to the seller shall be delivered by the seller to the Chief Commissioner before the 7th day of the month succeeding the month in which the declaration is furnished by the buyer.
Lower rate of TCS
If the assessing officer is satisfied that the total income of the buyer justifies the collection of TCS at a lower rate, the assessing officer shall, on an application made by the buyer in Form 13, give to him a certificate, for the collection of tax at such lower rate.
Payment of TCS
The buyer who has collected the tax at source is required to apply for a TAN number. This TAN number is required to be quoted in all the TCS Return Forms. The due date for depositing TCS to the government is same as the due date for depositing TDS i.e 7th day of the corresponding month to the month of which TDS is paid.
The person deducting the TCS is also required to furnish a TCS Return in the specified form and format stating the nature of goods sold, value of the goods sold and the TCS rate thereon.
E-payment of TCS
e-TCS is the filling of TCS return using electronic media. It is mandatory for corporate and government collectors to furnish TCS return in electronic form, w.e.f F.Y 2004-2005, others may file return in electronic and physical form.