Tax Collected at Source (TCS) is an essential component of India’s taxation framework. It mandates that sellers collect tax from buyers on specified transactions and deposit it with the government. This mechanism ensures that the authorities collect tax at the source of income or transactions, streamlining tax compliance and administration.
Tax Collected at Source (TCS) is a tax system where the seller of certain goods or services is responsible for collecting tax from the buyer and then remitting it to the government. The buyer pays the tax, but the seller ensures its correct collection and deposit. For example, if a box of chocolates costs ₹100 and the applicable TCS is 10%, the buyer pays ₹110, and the seller collects ₹10 as TCS.
Section 206C of the Income Tax Act, 1961, requires sellers to collect TCS on specific transactions and remit it to the authorities. This ensures the government collects tax directly from transaction sources, reducing the risk of tax evasion.
Certain entities are responsible for collecting TCS, including:
Buyers who are exempt from paying TCS include:
The items mentioned below can be used for two different purposes. The tax is determined by the reason for purchasing the products.
Trading of Goods – Since these goods are subject to duty, TCS collected at source will apply when they are used for trading purposes. Trading simply refers to the act of purchasing items from one party and selling them to another.
Manufacturers, processors, or producers using the specified goods to create other products are exempt from tax. Therefore, they do not need to collect TCS.
You may also want to know Form 26AS
Each type of product has a separate TCS tax rate:
| Type of Goods | Rate of TCS |
| Liquor of alcoholic nature, made for consumption by humans | 1.00% |
| Scrap | 1.00% |
| Minerals like lignite, coal, and iron ore | 1.00% |
| Bullion that exceeds over Rs. 2 lakhs/ Jewellery that exceeds over Rs. 5 lakhs | 1.00% |
| Purchase of Motor vehicle exceeding Rs. 10 Lakhs | 1.00% |
| Parking lot, Toll Plaza and Mining and Quarrying | 2.00% |
| Timber wood under a forest leased | 2.50% |
| Timber wood by any other mode than forest leased | 2.50% |
| A forest produce other than Tendu leaves and timber | 2.50% |
| Tendu leaves | 5.00% |
To ensure compliance, TCS returns must be filed by the following dates:
| Quarter Ending | Due date to file TCS return in Form 27EQ | Date for Generating Form 27D |
| 30th June | 15th July | 30th July |
| 30th September | 15th October | 30th October |
| 31st December | 15th January | 30th January |
| 31st March | 15th May | 30th May |
You may also want to know Income Tax Returns Filing Due Date
The tax collecting agency must issue Form 27D, the certificate for TCS, within a week after the end of the month in which it collected the tax. The agency can issue a combined certificate for multiple transactions if requested. If the certificate is misplaced, the agency can issue a new certificate on plain paper.
e-TCS: Tax collecting entities are required to file TCS returns electronically. Government and corporate entities must comply, while others may choose either electronic or paper filing.
Understanding Tax Collected at Source (TCS) is crucial for both buyers and sellers to ensure compliance with tax regulations. Sellers must accurately collect and remit TCS, while buyers should be aware of the applicable rates and exempt entities. Keeping track of TCS returns and deadlines helps avoid penalties and ensures smooth tax operations.
TCS stands for Tax Collected at Source.
The seller is responsible for collecting TCS from the buyer and remitting it to the government.
The penalty ranges from ₹10,000 to ₹1,00,000 under Section 271H.
TCS returns must be filed quarterly, with specific due dates for each quarter.
Yes, exemptions apply to certain buyers like public sector companies and government entities.
A TCS certificate is issued in Form 27D and can be obtained from the tax collecting agency.
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