Do you know that there is another tax payable by a buyer and collected by the seller? Yes, this kind of tax exists and is commonly known as TCS or Tax Collected at Source.
Further, under the governance of the Income Tax Act, 1961, of India, a seller will collect a fixed % of tax (TCS) from the buyers on some exceptional transactions. TCS tax is mostly applicable to trading or manufacturing businesses. This does not concern any common citizens of India.
Table of contents
- What is Tax Collected at Source (TCS) Tax?
- Sellers and Buyers Classification for TCS
- Goods Under TCS Provisions and Their Applicable Rates on Sale
- Certificate of Tax Collected at Source
- Tax Collected at Source Exemptions
- TCS Filing Due Dates in 2021-22
- Tax Collected at Source Under GST
- Frequently Asked Questions (FAQs)
What is Tax Collected at Source (TCS) Tax?
A TCS tax is collected at source, and is paid by a seller, which he gathers from the buyer during the sale. Also, Section 206C of the Income Tax Act lists the certain items on which a seller will gather tax from the buyers.
TDS vs TCS: What is the Difference?
The difference between TDS and TCS are as follows:
| Differentiating Terms | Tax Deducted At Source (TDS) | Tax Collected At Source (TCS) |
| Definition | TDS is tax deducted at source while the payment is made by any company or individual which exceeds the limit. | TCS is tax gathered by the seller at the sale of the product or goods. |
| Transactions | It is applicable on interest, rent, salaries, professional fees, commission or brokerage, purchase of goods, etc. | It is applicable on the sale of timber, tendu leaves, forest products, scrap, minerals, liquor, cars, toll tickets. |
| Limitations | It is applicable on the purchase of goods if the purchasing price is above Rs. 50 lakh, under Section 194Q. | It is applicable on the sale of goods if the payable amount is more than Rs. 50 lakhs, under Section 206C (1H). |
| Deduction or Collection Rates | The TDS deduction rate is 0.1% on the purchase of goods with an amount exceeding Rs. 50 lakhs. | The TCS collection rate is 0.1% for the sales of goods above the amount of Rs. 50 lakh. |
| Period of Deduction/= or Collection | It is deducted when a payment is made or is due, whichever is earlier. | It is gathered by the seller at the time of sale. |
| Responsibility | It is to be deducted by the individual or company or whoever is making the payment. | Collected by the individual or company for selling certain specified goods. |
| Pending Dates | The 7th of every month is the due date of depositing TDS. TDS returns, on the other hand, can be submitted on a quarterly basis. | TCS is collected on a monthly basis in which the supply is made. Within 10 days, it will be deposited from the month end of supply to the credit of the government. |
| Quarterly Filing of Statements | Three different returns are required to be filed for TDS, including Form 24Q (on salaries), Form 26Q (other than salaries), and Form 27Q (payments made to NRIs). | Filing Form 27EQ is required for the collection of tax at the source for quarterly returns. |
| PAN unavailable | According to Section 206AA, if someone fails to provide their PAN details, the person making the transaction will be charged TDS at a higher rate that is 20%. | According to Section 206CC, any individual paying the amount as per TCS has to provide their PAN details. If they are not able to share their PAN information, tax will be collected at a higher rate of 5% (twice the rate specified under the provision of this Act). |
Sellers and Buyers Classification for TCS
The classification of sellers and buyers for the collection of TCS is given below.
Classification of Sellers
Only a few people and organisations are classified as sellers for tax collected at the source. Also, only the following sellers can collect TCS.
- The central government and state government
- Local authority, statutory corporation or authority
- Registered companies under the Companies Act or firms in partnership
- Co-operative society
- Any individual or HUF under the mentioned financial year.
Classification of Buyers
Any individual who buys goods of certain nature via any auction, tender or other specified modes is called a buyer. The following buyers are not liable for paying TCS.
- Public sector companies
- State and central government
- Embassy of high commission
- Clubs, such as sports and social club
- Consulate and trades representing foreign nations
Goods Under TCS Provisions and Their Applicable Rates on Sale
TCS is applicable for the below-mentioned goods only when they are used for trading purposes. However, TCS(Tax Collected at Source) is not applicable if they are used for processing, producing, and manufacturing purposes. The payable tax is gathered by the seller at the time of sale. Here are different rates for goods under different categories.
| Kinds of Goods | Applicable Rate |
| Liquor made for consumption by humans | 1% |
| Timber wood (under a leased forest) | 2.50% |
| Tendu leaves | 5% |
| Timber wood (other than forest leased) | 2.50% |
| Tendu leaves and timber | 2.50% |
| Scrap | 1% |
| Minerals (lignite, coal and iron ore) | 1% |
| Bullion exceeding Rs. 2 lakhs or jewellery price exceeding Rs. 5 lakhs | 1% |
| Motor vehicle price exceeding Rs. 10 Lakhs | 1% |
| Mining and quarrying, parking lot, and toll plaza | 2% |
Certificate of Tax Collected at Source
While filing a quarterly tax return, the tax collector will use Form 27EQ, where he has to give a TCS certificate for purchasing goods. He also has to submit Form 27D to prove that you have filed the TCS returns. Here are the details present in the certificate.
- Name of the buyer and seller
- Seller’s TAN details (filing quarterly TCS return)
- Both the buyers and the seller’s PAN information.
- Collection date
- Tax rate applied
- Entire tax collected by the seller
Note: Your tcs certificate will be issued within 15 days of filing TCS quarterly returns from the date of filing.
Tax Collected at Source Exemptions
Here are the cases for which the Tax Collected at Source can be exempted:
- When the goods are used for personal consumption.
- The buyer purchases goods for processing, manufacturing, and production but not for the trading purpose of these goods.
TCS Filing Due Dates in 2021-22
Here are the due dates for filing TCS in 2021-22.
| Quarter | Period | Due Date of Filing |
| Quarter 1 | 1st April to 30th June | 30th of July, 2022 |
| Quarter 2 | 1st July to 30th September | 30th of October, 2022 |
| Quarter 3 | 1st October to 31st December | 30th of January, 2022 |
| Quarter 4 | 1st January to 31st March | 30th of May, 2022 |
Tax Collected at Source Under GST
As per the effective provisions from 1st Oct 2018, the following are the rules of TCS under GST.
- Any seller dealing with goods online will receive payment from the online platform only after the deduction of 1% of the tax amount, as per the IGST Act (0.5% CGST and 0.5% SGST).
- Every individual has to deposit the tax by the 10th of the upcoming month to the government.
- All individuals have to register mandatorily under GST.
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Frequently Asked Questions (FAQs)
How can I file TCS returns online?
Visit the online portal of ITD and log in using your TAN and password. Go to the TDS menu and upload TDS. Also, in the given form, select statement details, financial year, form name, quarter, and type of upload format. Click to verify. Once the verification is done, you will see a message stating TCS return filed successfully.
Should sellers collect TCS on an amount inclusive of GST?
Yes, sellers should collect TCS on an amount inclusive of GST. The TCS collected from a buyer at the time of debiting or at the time of receipt by any mode will be inclusive of VAT/service/GST.
What happens if someone filed late TCS returns?
If a person files the TCS return late, Rs. 200 will be charged per day till you file the returns. However, your fee charged must not exceed the limit of TCS.
Note: Rs. 200 is a fee and not a penalty charge.
Do I have to give a penalty for any inappropriate filing of TCS returns?
As per Section 271H, a penalty can be levied if the tax collector files a complaint about an incorrect TCS return. The penalty can be a hefty amount of Rs. 10,000 or Rs. 1,00,000.
In Form 26AS, can I check my Tax Collected at Source?
Yes, you can check all the information about the TCS tax by a seller. The form will display all the information about the seller’s details along with the entire TCS amount and the transaction for which the tax collection was done at the source.
What is TCS tax? Explain with an example?
If someone is purchasing a car of Rs. 10 lakh, they have to pay Rs. 10,010 as Tax Collected at Source. This amount is to be paid to only a particular branch of the bank. Only a few banks are given permission to receive such payments.
Where is Tax Collected at Source applicable?
The Tax Collected at Source is applicable for all the transactions that exceed the value of Rs. 50 lakh. However, if the buyer’s turnover exceeds the limit of Rs 10 crores in the previous year, TDS would apply over the TCS.
