Category : Indirect Tax

Indirect Tax

tax Collected At Source

Tax collected at Source (TCS)

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
1. Scrap 1%
2. Tendu leaves 5%
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%

TCS Exemption

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.


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Indirect Tax

Basic Information on Service Tax in India

Service Tax is a tax which is paid by the provider of service. Any person whose revenue from providing of any type service (whether Consultancy/Affiliate/Designing/ SEO or any other service) during the year is more than Rs. 10 Lakh is liable to pay service tax as per the tax rates prescribed by the govt.

The current service tax rate is 15%, and this rate varies due to changes done in budget  announced every year. Service Tax is liable to be paid on any service rendered by any person in India if the revenue of the person providing the service is more than Rs. 10 Lakh p.a. This service tax is also levied on bloggers and freelancers as they also provide a form of Service.

It is pertinent to note here that Sale of Ad Space on a website is also a part of Service and Service Tax would also be levied on Sale of Ad Units on a Website/ Mobile device. From 1st July 2012 till 30th Sept 2014 – sale of ad space on a website/ mobile was specifically exempted from the levy of Service Tax as this was included in the negative list of services on which service tax is not applicable.

However, Budget 2014 brought in an amendment and now sale of Ad Unit on a Website/ Mobile would attract Service Tax @ 15% wef 1st June 2016. This Service Tax would be applicable on all kind of digital ads i.e. Direct Ad Sales, Google Adsense Ads, Ad Sales through Agents etc.

Service Tax Exemption

Service Tax is not levied in the following cases:-

  1. In case the Total Revenue/Turnover of the business is less than Rs. 10 Lakhs. This exemption is known as Small Scale Exemption.
  2. All Services which are exported out of India are also exempted from the levy of Service Tax. The Govt. has specified several rules for determination of whether a service provided is considered as Export or not.

Service Tax Rate

Service Tax is levied @15% on revenue whereas income tax which is levied on the total income. The difference between revenue and Income is explained with the help of the following equation:-

Revenue – Expenses = Income

So, if the total revenue (excl ad sales) during the year is more than Rs. 10 Lakh, you would be required to pay service tax to the govt.

Charging of Service Tax to the Client

Although service tax is payable by the person who is providing the service he can still charge it from your client. This can be explained with the help of the following example.

For eg: Mr. A provides some service to Mr. B for Rs. 50 Lakhs on which Service Tax is levied @ 15%. Now in this case, service tax of Rs. 7,50,000 is payable by Mr. A to the govt. However, Mr. A can charge this service tax amount of Rs.7,50,000 from Mr. B and then deposit this with the govt. Practically, Mr. B also won’t mind paying this extra Rs.7,50,000extra as he knows that this amount is not going into the pockets of Mr. A, and Mr. A would be depositing this amount with the govt.

This is how the whole service tax industry works wherein the person who is providing the services, charges the service tax amount from the person receiving the service. You may have also noticed in restaurants and at many places it is written – “Service Taxes extra”.

Service Tax extra basically means that the person receiving the service has to himself pay the service tax over and above the rates mentioned.

In case, you don’t charge Service Tax from your client, you would be required to pay this service tax amount from your own pocket. However, if your total net revenue during the year is less than Rs. 10 Lakhs, you won’t be required to pay this service tax at all.



Service Tax Registration, Payment and Return Filing


Just like PAN No. is issued to each individual for filing his Income Tax Return, similarly Service Tax No. is also issued to every person liable to pay Service Tax. Registration for service tax is a simple process and application for service tax can also be made online through the automated website of the Central Excise and Service Tax Department.

Different due dates have been prescribed by the Govt for the payment of service tax depending on the kind of registration (Individual/ Company).

Service Tax Return which is a statement of the revenue earned from different type of Services is also required to be filed on a half yearly basis every year in the month of October and April.

However, you are only required to apply for service tax registration and file service tax return only when the total net revenue during the year exceeds Rs. 9 Lakhs (excl ad sales). So, the important thing to remember here is that Service Tax is liable to be paid only when the revenue (excl ad sales) exceeds Rs. 10 Lakhs p.a. but is required to apply for service tax registration when the revenue exceeds Rs. 9 Lakhs p.a.

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Indirect Tax

New Information about TDS

Budget 2016: Under the scheme of deduction of tax at source a provided in the Act, every person responsible for payment of any specified sum to any person is required to deduct tax at source at the prescribed rate and deposit it with the Central Government within specified time. However, no deduction is required to be made if the payments do not exceed prescribed threshold limit.
In order to rationalise the rates and base for TDS provisions, the existing threshold limit for deduction of tax at source and the rates of deduction of tax at source are proposed to be revised as mentioned in table 3 and table 4 respectively.
– See more at: Reminder from tax department to pay tax on interest income, revise returns if required
by Cleartax-Team on March 25, 2016 in Form 26AS, Income from Other Sources, Income Tax, Income Tax Penalty, Section 80 Deductions, TDS
In last year’s tax returns a disclosure in tax returns was added for bank accounts held by a tax payer.
It seems the income tax department has done its work related to this information. It has recently asked tax payers to include entire interest income in their tax return and pay tax on it. The release also said that you must revise your revise your tax return if you did not include interest income.
Important points regarding tax on interest income –
• Include all interest incomes in your tax return: All types of interest income should be included in your tax return.
All of these interest incomes are taxable –
• Interest income from a savings account with banks, co-operative banks, post offices
• Interest income from a fixed deposit
• Interest income a recurring deposit
• Interest income from corporate bonds
• Interest income from government bonds (unless specifically notified by the government)
• Interest income from capital gains bonds
• Interest income from post office savings deposit schemes
• Interest income from post office monthly schemes
• Interest income on NSCs
• Interest income from Kisan Vikas Patras.

• Form 26AS includes only that interest income on which TDS is deducted: A lot of tax payers include interest income which appears in their Form 26AS. This is the interest income on which TDS has been deducted. Since no TDS is deducted from a savings bank account, such interest income is not included. However, interest from a savings account is taxable and must be included in your tax return.

• Deduction under section 80TTA: Are you unsure about how to claim this deduction – readhere in detail. A lot of taxpayers make the mistake of assuming this deduction is available on all types of interest. And sometimes they completely miss out on including interest in their tax returns. (More helpful reading here).

• Government has information of interest paid by payer without TDS deduction: The circular from the income tax department mentions that the government has details from payers of interest paid by them without deducting TDS. So make no mistakes and remember to include these in your income tax returns.

• Where a Form 15G and Form 15H is filed but total income of tax payer exceeds Rs 2,50,000: Sometimes you may have filed a Form 15G and Form 15H but at the end of the year realised that your total income is more than the minimum exempt income of Rs 2,50,000. In such a case, you must include interest for which you gave Form 15G/Form15H. Even though no TDS is deducted, such income is fully taxable.

(Find out if you are eligible to fill Form 15G/Form 15H here. Instructions to fill Form 15G arehere).

What should you do to comply with the circular
• File your income tax return of income for Assessment Year 2014-15 (if not filed already) by 31st March 2016. Assessment year 2014-15 relates to financial year 2013-14. Minimum income exempt from tax for this year is Rs 2,00,000.
• Revise your income tax return of income for assessment year 2014-15/2015-16 if the return already filed does not include taxable interest income. Minimum income exempt from tax for these years is Rs 2,50,000.
• File income tax return of income for assessment year 2015-16, if not filed so far and include taxable interest income if any. This return must be filed by 31st March 2016 to avoid penalty of Rs 5,000 under section 271F.

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Indirect Tax


With reference to Notification No VAT 1515/CR-169/Taxation -1 Section 9 of MVAT, the Government of Maharashtra hereby, with effect from 2nd January 2016, amends schedule ‘A’, after entry 12A the following entry inserted with NIL %. Drugs and medical equipments used in dialysis for the treatment of patients suffering from kidney disease as may be notified from time to time by State Government, in the official Gazette.

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