What is Tax Collected at Source (TCS)?

Tax Collected at Source (TCS) is income tax collected in India payable by the seller who collects in turn from the buyer and it is provided under section 206C of Income Tax Act, 1961 at the sale of some goods which are specified. The TCS Rate is different for each category of goods and the Rates in force have been enclosed herewith.

TCS Rates in India

Note that the interest charges for late payment of the TCS to the Government, for every month delayed is 1%.

Type of Goods Tax %
Liquor of alcoholic nature, made for consumption by humans 1.00%
Timber wood under a forest leased 2.50%
Tendu Leaves 5.00%
Timber wood by any other mode than forest leased 2.50%
A forest produce other than Tendu leaves and timber 2.50%
Scrap 1.00%
Parking lot, Toll Plaza and Mining and Quarrying 2.00%
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%

Classification of Seller for TCS

These are the following people and organisations under tax collected at source; a seller is defined as any of the following

  • Central Government
  • State Government
  • Local Authority
  • Statutory Corporation or Authority
  • Company
  • Partnership Firms
  • Co-operative Society
  • Under the Section 44AB if any Individual or a Hindu Undivided Family (HUF) who has total sales or gross receipts that exceed the specified monetary restricts as mentioned in the last year.

Classification of Buyer for TCS

A buyer is an individual who obtains goods or even the right of receiving goods at a sale, tender, auction or other modes. These are the following people and organisations who are exempted from the classification as buyers for TCS.

  • Public Sector Entities or Companies
  • Central Government
  • State Government
  • Embassy of High Commission
  • Consulate and other Trade Representation of a Foreign Nation
  • Clubs such as sports clubs and social clubs

Goods and Transactions Classified under TCS

The following are considered for collecting tax at source:

  • Liquor of alcoholic nature for human consumption including IMFL(Indian Made Foreign Liquor)
  • Timber wood obtained from a forest that has been leased
  • Tendu Leaves
  • Timber wood by any other mode than leased
  • A forest produce other than Tendu leaves and timber
  • Scrap
  • Toll Plaza, Parking lot ticket, Quarrying, and Mining
  • Minerals that include lignite or coal or iron ore
  • Bullion that exceeds over Rs. 2 lakhs/ Jewellery that exceeds over Rs. 5 lakhs

Certificate of TCS

Form 27D is a certificate needs to be submitted in the within 7 days’ time from the last date of the month in which that tax had been collected by the people or individual who is collecting TCS.

In the period that ends on September 30 and March 31 for a financial year, there are more than one certificates to be issued for a buyer for TCS, a consolidated certificate can be issued within a month from the last day of the period. This certificate has to be requested from the buyer.

In case if the TCS certificate is lost by the individual then in charge officer for the collection of TCS source can issue a duplicate certificate that can be printed and attested on plain paper, along with required details as mentioned in the Form 27D.

TCS Exemptions

There are two types of exemptions that include lower rated TCS and total exemption for tax collected at source:

TCS at Lower Rate

With the help of Form No.13, a buyer can apply to the Assessing Officer for collecting the tax at source at a lower rate to the condition that the Assessing Officer is convinced that the total income of the buyer justifies for a lower rate. The Officer may as well issue a certificate, that has the rate of TCS specified with the lower rate applied.

Total Tax Exemption

This is the declaration by the buyer in form No. 27C which has to be made for the total exemption for paying TCS. In this declaration, it has to be specified and prove that the goods that have been declared are planned for the purposes of processing and manufacturing of the goods and not trading purposes. The person or entity collecting the tax also has to be given a duplicate copy of the declaration form, after which the collector has to submit the declaration form to the appropriate authorities within a week of the following day.

Electronic TCS (e-TCS)

e- TCS is the process of filing TCS returns through electronic media. It is necessary for government and corporate collectors to file TCS returns in its electronic form. Collectors (other than government) have the provision to file TCS returns in physical form or electronic form.  NSDL is in charge for the collection of the e-TCS returns from the collectors on behalf of the Income Tax Department.

There are certain TCS-specific form formats which should contain all information for filing the TCS returns.

This includes:

  • CD-ROM with a capacity >=650 MB
  • A DATA Cartridge which is 4mm 2GB/4GB (90M/120M)
  • 1.44 MB floppy diskette that is 3.5 Inches

The returns must be accompanied with a Form No.27B and it is mandatory to get verified.

Filing of TCS Returns

TCS returns are to be filed quarterly, in addition to annual returns.

  • The quarterly returns are to be filed in Form Number 27EQ on or before  July 15, October 15 and January 15, respectively for the first three-quarters of the financial year. For the last quarter, the returns are to be filed on or before April 30.  
  • Annual returns are to be filed in Form Number 27E on or before June 30 of the following financial year

In case you are confused about TDS Return Filing as a deductor, feel free to consult the experts at LegalRaasta. You can get comprehensive assistance with our TDS Return filing software which supports TDS on Salary payments Form 24Q, Rent, Interest, Commission and other Non-salary transactions (Form 26Q), NRI (Form 27Q) and TCS Form27EQ.