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Trusted by 1L+ Indians
Want to Achieve any of the below Goals upto 80% faster?
Dream Home
Dream Wedding
Dream Car
Retirement
1st Crore
Dream Home
Dream Wedding
Dream Car
Retirement
1st Crore
Trusted by 3 Crore+ Indians
Want to Achieve any of the below
Goals upto 80% faster?
Dream Home
Dream Wedding
Dream Car
Retirement
1st Crore
Trusted by 3 Crore+ Indians
Want to Achieve any of the below
Goals upto 80% faster?
Dream Home
Dream Wedding
Dream Car
Retirement
1st Crore
Trusted by 3 Crore+ Indians
Want to Achieve any of the below Goals upto 80% faster?
Dream Home
Dream Wedding
Dream Car
Retirement
1st Crore
Trusted by 3 Crore+ Indians
Want to Achieve any of the below Goals upto 80% faster?
Dream Home
Dream Wedding
Dream Car
Retirement
1st Crore
When Should Tax Collected at Source (TCS) Be Collected?
When Should Tax Collected at Source (TCS) Be Collected?
Tax Collected at Source (TCS) is an important mechanism in the Indian tax system where the seller collects tax from the buyer at the time of a transaction. The collected tax is then deposited with the government. Understanding when TCS should be collected is crucial for ensuring compliance with tax regulations and avoiding potential penalties.
TCS must be collected by the seller at the earliest of the following two instances:
When the seller debits the amount payable by the buyer to the buyer’s account in the seller’s books of accounts.
Upon receipt of the payment from the buyer, which could be made through cash, cheque, draft, or any other form of payment.
In transactions involving the sale of motor vehicles, the TCS should be collected at the time of receipt of the payment or consideration for the motor vehicle from the buyer. This ensures that the tax is collected as soon as the transaction is completed.
TCS Rates for Specific Goods
The rates at which TCS is collected vary based on the type of goods or transactions. Here’s a detailed breakdown of the TCS rates applicable to different categories of goods:
Liquor of alcoholic nature, made for human consumption - 1%
Timber wood obtained from a forest lease - 2.5%
Tendu leaves - 5%
Timber wood obtained from sources other than a forest lease - 2.5%
Forest produce other than tendu leaves and timber - 2.5%
Scrap - 1%
Minerals such as lignite, coal, and iron ore - 1%
Purchase of motor vehicles exceeding Rs.10 lakh - 1%
Parking lots, toll plazas, and mining and quarrying activities - 2%
For sellers whose total turnover exceeds Rs.10 crore in the previous financial year and who receive sale consideration of more than Rs.50 lakh for any product, TCS must be collected on the amount exceeding Rs.50 lakh. In the absence of a Permanent Account Number (PAN) from the buyer, the TCS rate applicable is 0.1%.
When Will the Higher TCS Rate Apply?
According to Section 206CCA, a higher TCS rate applies under specific conditions:
If the buyer has not filed Income Tax Returns (ITR) for the last two financial years prior to the relevant financial year in which TCS is to be collected.
If the deadline for filing ITR has expired.
If the total TCS and Tax Deducted at Source (TDS) were more than Rs.50,000 in each of the two preceding financial years.
The higher TCS rate will be the greater of the following:
Twice the TCS rate specified in the Income Tax Act for the relevant goods.
5% of the sale amount.
In special cases, as outlined in Section 206C(IG), a 5% TCS rate applies for remittances exceeding Rs.7 lakh in a financial year under the Liberalized Remittance Scheme (LRS) for foreign currency. If the buyer does not provide Aadhaar or PAN details, the TCS rate increases to 10%. This TCS is collected when debiting the buyer’s account or upon receipt of the payment.
Classification of Sellers for TCS
Certain entities are classified as sellers eligible to collect TCS. These include:
Central Government
State Government
Local Authorities
Statutory Corporations or Authorities
Companies registered under the Companies Act
Partnership Firms
Co-operative Societies
Individuals or Hindu Undivided Families (HUFs) subject to an audit of accounts under the Income-tax Act for the financial year.
Only these specified entities are authorized to collect TCS from buyers. Other sellers are not permitted to collect tax at source.
Classification of Buyers for TCS
A buyer, as per the provisions, is anyone who obtains goods specified under the TCS regulations through purchase, auction, or any other means. However, TCS is not required to be collected from:
Public sector companies
Central Government
State Government
Embassies, High Commissions, and Consulates of foreign nations
Clubs, such as sports or social clubs
Residents purchasing goods for manufacturing, processing, or producing articles or generating power (and providing a written declaration for the same).
Example of TCS Calculation
To illustrate TCS calculation, consider the following examples:
Car Purchase: If a buyer purchases a car valued at Rs.11 lakh, the TCS amount would be Rs.11,000 (1% of Rs.11 lakh). Hence, the total amount payable by the buyer is Rs.11,11,000.
Invoice Example: For an invoice amounting to Rs.12,000, with a TCS rate of 1%, the TCS would be Rs.120. Therefore, the total payable amount by the customer would be Rs.12,120 (Rs.12,000 + Rs.120).
TCS Payments and Returns
Tax collectors must follow specific procedures for TCS payments and returns:
Payment: All collected TCS amounts must be deposited with the government within seven days of the end of the month in which the tax was collected, using Challan 281.
Interest for Delay: If TCS is not collected or remitted on time, an interest charge of 1% per month or part of the month will be levied.
Quarterly Returns: Tax collectors must file a quarterly TCS return using Form 27EQ, which should include details of the TCS collected. Interest for delayed payments should be settled before filing this return.
TCS Certificate
After filing the quarterly TCS return, the tax collector is required to issue a TCS certificate to the buyer. This certificate, known as Form 27D, must be issued within 15 days from the date of filing the TCS return and should include:
Name of the seller and buyer
Tax Deduction and Collection Account Number (TAN) of the seller
Permanent Account Numbers (PAN) of both the seller and buyer
Total tax collected by the seller
Date of collection
Rate of tax applied
TCS Exemptions
Exemptions from TCS collection apply in the following cases:
Goods purchased for personal consumption.
Purchases made for manufacturing, processing, or production (not for trading purposes) with a written declaration.
TCS Provision under GST for E-commerce Sales
Under the Goods and Services Tax (GST) framework, any dealer or trader selling goods through e-commerce platforms must have TCS deducted by the platform at a rate of 1% under the IGST Act (0.5% CGST and 0.5% SGST). The deducted tax must be deposited with the government by the 10th of the subsequent month. This provision, effective from 1 October 2018, ensures that e-commerce transactions comply with tax regulations.
Example: If Mr. Raj, a trader selling clothes on Flipkart, receives an order worth Rs.10,000 (inclusive of commission), Flipkart will deduct Rs.100 as TCS (1% of Rs.10,000).
TCS Provision in Foreign Remittance Transactions
For remittances made abroad under the Liberalized Remittance Scheme (LRS), TCS applies to various transactions including travel, asset purchases, and investments. The TCS rate for most remittances was increased from 5% to 20% in the 2023 Union Budget, effective from 1 October 2023, excluding medical and educational expenses, which remain at 5% for amounts exceeding Rs.7 lakh. Taxpayers can claim TCS deductions as refunds or credits while filing income tax returns.
Example: If a person remits Rs.5 lakh for investing in US stocks, the TCS on this amount would be Rs.1 lakh. If the individual's total tax liability is Rs.3 lakh, they can use the TCS amount to reduce their outstanding tax liability to Rs.2 lakh.
Submission of Form 24G
For government offices where tax is deposited without a challan, Form 24G must be submitted. This form must be filed within 15 days from the end of the relevant month. For March, the submission deadline is 30 April. The form can be submitted electronically with a digital signature, along with Form 27A or through prescribed electronic processes. The Principal Director General of Income Tax (Systems) specifies the procedures for submitting and verifying Form 24G.
Rules for Depositing TDS and TCS Without Challan
TDS Without Challan: If TDS is deposited without a challan, a statement in Form 24G must be submitted within 15 days from the end of the relevant month. For March, it should be submitted by 30 April, and it must be filed electronically with a digital signature or verification through Form 27A.
TCS Without Challan: Similar to TDS, if TCS is deposited without a challan, Form 24G must be submitted within 15 days from the end of the relevant month, and the procedures for submission are similar to those for TDS.
Interest and Penalty for Non-compliance
If a tax collector fails to remit TCS to the government within the due dates, an interest charge of 1% per month or part of the month is applicable. Additionally, if an erroneous TCS return is filed, a penalty ranging from a minimum of Rs.10,000 to a maximum of Rs.1 lakh may be imposed.
This comprehensive guide should help in understanding the specific instances when TCS should be collected, the applicable rates, exemptions, and the process for payment and compliance. If you have any more questions or need further clarification, feel free to ask!
Tax Collected at Source (TCS) is an important mechanism in the Indian tax system where the seller collects tax from the buyer at the time of a transaction. The collected tax is then deposited with the government. Understanding when TCS should be collected is crucial for ensuring compliance with tax regulations and avoiding potential penalties.
TCS must be collected by the seller at the earliest of the following two instances:
When the seller debits the amount payable by the buyer to the buyer’s account in the seller’s books of accounts.
Upon receipt of the payment from the buyer, which could be made through cash, cheque, draft, or any other form of payment.
In transactions involving the sale of motor vehicles, the TCS should be collected at the time of receipt of the payment or consideration for the motor vehicle from the buyer. This ensures that the tax is collected as soon as the transaction is completed.
TCS Rates for Specific Goods
The rates at which TCS is collected vary based on the type of goods or transactions. Here’s a detailed breakdown of the TCS rates applicable to different categories of goods:
Liquor of alcoholic nature, made for human consumption - 1%
Timber wood obtained from a forest lease - 2.5%
Tendu leaves - 5%
Timber wood obtained from sources other than a forest lease - 2.5%
Forest produce other than tendu leaves and timber - 2.5%
Scrap - 1%
Minerals such as lignite, coal, and iron ore - 1%
Purchase of motor vehicles exceeding Rs.10 lakh - 1%
Parking lots, toll plazas, and mining and quarrying activities - 2%
For sellers whose total turnover exceeds Rs.10 crore in the previous financial year and who receive sale consideration of more than Rs.50 lakh for any product, TCS must be collected on the amount exceeding Rs.50 lakh. In the absence of a Permanent Account Number (PAN) from the buyer, the TCS rate applicable is 0.1%.
When Will the Higher TCS Rate Apply?
According to Section 206CCA, a higher TCS rate applies under specific conditions:
If the buyer has not filed Income Tax Returns (ITR) for the last two financial years prior to the relevant financial year in which TCS is to be collected.
If the deadline for filing ITR has expired.
If the total TCS and Tax Deducted at Source (TDS) were more than Rs.50,000 in each of the two preceding financial years.
The higher TCS rate will be the greater of the following:
Twice the TCS rate specified in the Income Tax Act for the relevant goods.
5% of the sale amount.
In special cases, as outlined in Section 206C(IG), a 5% TCS rate applies for remittances exceeding Rs.7 lakh in a financial year under the Liberalized Remittance Scheme (LRS) for foreign currency. If the buyer does not provide Aadhaar or PAN details, the TCS rate increases to 10%. This TCS is collected when debiting the buyer’s account or upon receipt of the payment.
Classification of Sellers for TCS
Certain entities are classified as sellers eligible to collect TCS. These include:
Central Government
State Government
Local Authorities
Statutory Corporations or Authorities
Companies registered under the Companies Act
Partnership Firms
Co-operative Societies
Individuals or Hindu Undivided Families (HUFs) subject to an audit of accounts under the Income-tax Act for the financial year.
Only these specified entities are authorized to collect TCS from buyers. Other sellers are not permitted to collect tax at source.
Classification of Buyers for TCS
A buyer, as per the provisions, is anyone who obtains goods specified under the TCS regulations through purchase, auction, or any other means. However, TCS is not required to be collected from:
Public sector companies
Central Government
State Government
Embassies, High Commissions, and Consulates of foreign nations
Clubs, such as sports or social clubs
Residents purchasing goods for manufacturing, processing, or producing articles or generating power (and providing a written declaration for the same).
Example of TCS Calculation
To illustrate TCS calculation, consider the following examples:
Car Purchase: If a buyer purchases a car valued at Rs.11 lakh, the TCS amount would be Rs.11,000 (1% of Rs.11 lakh). Hence, the total amount payable by the buyer is Rs.11,11,000.
Invoice Example: For an invoice amounting to Rs.12,000, with a TCS rate of 1%, the TCS would be Rs.120. Therefore, the total payable amount by the customer would be Rs.12,120 (Rs.12,000 + Rs.120).
TCS Payments and Returns
Tax collectors must follow specific procedures for TCS payments and returns:
Payment: All collected TCS amounts must be deposited with the government within seven days of the end of the month in which the tax was collected, using Challan 281.
Interest for Delay: If TCS is not collected or remitted on time, an interest charge of 1% per month or part of the month will be levied.
Quarterly Returns: Tax collectors must file a quarterly TCS return using Form 27EQ, which should include details of the TCS collected. Interest for delayed payments should be settled before filing this return.
TCS Certificate
After filing the quarterly TCS return, the tax collector is required to issue a TCS certificate to the buyer. This certificate, known as Form 27D, must be issued within 15 days from the date of filing the TCS return and should include:
Name of the seller and buyer
Tax Deduction and Collection Account Number (TAN) of the seller
Permanent Account Numbers (PAN) of both the seller and buyer
Total tax collected by the seller
Date of collection
Rate of tax applied
TCS Exemptions
Exemptions from TCS collection apply in the following cases:
Goods purchased for personal consumption.
Purchases made for manufacturing, processing, or production (not for trading purposes) with a written declaration.
TCS Provision under GST for E-commerce Sales
Under the Goods and Services Tax (GST) framework, any dealer or trader selling goods through e-commerce platforms must have TCS deducted by the platform at a rate of 1% under the IGST Act (0.5% CGST and 0.5% SGST). The deducted tax must be deposited with the government by the 10th of the subsequent month. This provision, effective from 1 October 2018, ensures that e-commerce transactions comply with tax regulations.
Example: If Mr. Raj, a trader selling clothes on Flipkart, receives an order worth Rs.10,000 (inclusive of commission), Flipkart will deduct Rs.100 as TCS (1% of Rs.10,000).
TCS Provision in Foreign Remittance Transactions
For remittances made abroad under the Liberalized Remittance Scheme (LRS), TCS applies to various transactions including travel, asset purchases, and investments. The TCS rate for most remittances was increased from 5% to 20% in the 2023 Union Budget, effective from 1 October 2023, excluding medical and educational expenses, which remain at 5% for amounts exceeding Rs.7 lakh. Taxpayers can claim TCS deductions as refunds or credits while filing income tax returns.
Example: If a person remits Rs.5 lakh for investing in US stocks, the TCS on this amount would be Rs.1 lakh. If the individual's total tax liability is Rs.3 lakh, they can use the TCS amount to reduce their outstanding tax liability to Rs.2 lakh.
Submission of Form 24G
For government offices where tax is deposited without a challan, Form 24G must be submitted. This form must be filed within 15 days from the end of the relevant month. For March, the submission deadline is 30 April. The form can be submitted electronically with a digital signature, along with Form 27A or through prescribed electronic processes. The Principal Director General of Income Tax (Systems) specifies the procedures for submitting and verifying Form 24G.
Rules for Depositing TDS and TCS Without Challan
TDS Without Challan: If TDS is deposited without a challan, a statement in Form 24G must be submitted within 15 days from the end of the relevant month. For March, it should be submitted by 30 April, and it must be filed electronically with a digital signature or verification through Form 27A.
TCS Without Challan: Similar to TDS, if TCS is deposited without a challan, Form 24G must be submitted within 15 days from the end of the relevant month, and the procedures for submission are similar to those for TDS.
Interest and Penalty for Non-compliance
If a tax collector fails to remit TCS to the government within the due dates, an interest charge of 1% per month or part of the month is applicable. Additionally, if an erroneous TCS return is filed, a penalty ranging from a minimum of Rs.10,000 to a maximum of Rs.1 lakh may be imposed.
This comprehensive guide should help in understanding the specific instances when TCS should be collected, the applicable rates, exemptions, and the process for payment and compliance. If you have any more questions or need further clarification, feel free to ask!
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