Tax Collected at Source

The Indian Income Tax Act includes provisions for Tax Collection at Source (TCS), which require certain sellers to collect a percentage of tax from buyers during specific types of transactions. These transactions are generally related to business or trade activities and don’t typically affect the common taxpayer.

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Overview - Tax Collected at Source

TCS is a tax that sellers collect from buyers on the sale of certain goods or services. The collected tax must be deposited with the government within the prescribed due dates.

Key points to remember:

Section 206C of the Income Tax Act specifies which goods and transactions require TCS collection.
The seller must have a Tax Collection Account Number (TAN) to collect and deposit TCS.
The seller only collects and deposits the tax — they are not personally responsible for paying it.

Classification of Sellers for Tax Collected at Source (TCS)

Only specific types of entities are authorized to collect Tax Collected at Source (TCS) from buyers. These designated sellers include:

Statutory Corporations or Authorities
Companies
Co-operative Societies
Local Authorities
Partnership Firms
State Government
Central Government
Individuals or Hindu Undivided Families (HUFs) subject to tax audits under Section 44AB of the Income Tax Act

Classification of Buyers for Tax Collected at Source (TCS)

A buyer under TCS refers to any individual or entity that purchases goods — or acquires rights to receive goods — through a sale, auction, tender, or similar method. Buyers are required to pay TCS to the seller. However, certain entities are exempt from this tax:

Embassies and High Commissions
Central Government
State Government
Public Sector Enterprises
Consulates and Trade Representatives of Foreign Nations
Social Clubs and Sports Clubs
Buyers purchasing goods strictly for manufacturing or power generation purposes, not for resale or trading

Goods Covered Under TCS Provisions

The following goods and services fall under the Tax Collected at Source (TCS) provisions:

Alcoholic liquor, including Indian-made foreign liquor
Forest produce (excluding timber and tendu leaves)
Scrap
Tendu leaves
Timber wood from a leased forest area
Timber wood acquired by any means other than a forest lease
Minerals, such as iron ore, lignite, or coal
Bullion exceeding ₹2 lakhs or jewelry exceeding ₹5 lakhs
Motor vehicles costing over ₹10 lakhs
Parking lots, toll plazas, mining, and quarrying

When is Tax Collected at Source (TCS) Collected?

TCS is collected by the seller from the buyer at the earlier of the following events:

At the time of receiving payment – Whether the buyer pays in cash, cheque, or draft
When the amount is recorded as payable in the seller’s books of accounts

For motor vehicle purchases, TCS is collected when the payment is received from the buyer. This means the tax is included in the total price paid at the time of purchase. However, TCS applies only if the motor vehicle’s cost exceeds ₹10 lakhs.

e-TCS (Electronic Tax Collected at Source)

e-TCS refers to the electronic filing of TCS returns.

Since the 2004-2005 financial year, government and corporate entities are mandated to file TCS returns electronically.
Other collectors may choose to file returns either electronically or in paper format.
The NSDL (National Securities Depository Limited) is responsible for receiving e-TCS returns on behalf of the Income Tax Department.
The filing process requires specific TCS return formats to ensure compliance with tax regulations.

TCS Rates for Different Goods & Services

Each type of product or service is subject to a specific Tax Collected at Source (TCS) rate:

Type of Goods/Services	TCS Rate
Alcoholic liquor for human consumption	1.00%
Scrap materials	1.00%
Minerals (Lignite, Coal, Iron Ore)	1.00%
Bullion (exceeding ₹2 lakhs) / Jewellery (exceeding ₹5 lakhs)	1.00%
Purchase of motor vehicles (cost exceeding ₹10 lakhs)	1.00%
Parking lot, Toll Plaza, Mining & Quarrying	2.00%
Timber wood obtained under a forest lease	2.50%
Timber wood obtained by any other means (not leased)	2.50%
Other forest produce (excluding Tendu leaves and timber)	2.50%
Tendu leaves	5.00%

TCS Return Due Dates

Quarter Ending	Due Date for Filing TCS Return (Form 27EQ)	Due Date for Issuing 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

Interest on Non-Payment of TCS

If a tax collector fails to collect TCS or, after collecting it, does not deposit it with the government within the stipulated due dates, an interest charge of 1% per month or part of the month will be applicable until the tax is fully paid.

Penalty for Incorrect TCS Filing

As per Section 271H, filing an inaccurate TCS return can result in penalties.

A minimum penalty of ₹10,000
A maximum penalty of ₹1,00,000

Differences Between TDS and TCS

Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) are both tax collection mechanisms in India. However, they apply at different stages of financial transactions and cover different types of payments.

Feature	TDS (Tax Deducted at Source)	TCS (Tax Collected at Source)
Point of Taxation	Deducted at the time of payment	Collected at the point of sale
Collector	Deducted by the payer (the person making the payment)	Collected by the seller (the person receiving payment from the buyer)
Applicability	Applicable to payments such as salaries, professional fees, rent, and interest	Applies to transactions involving specific goods like alcoholic beverages, tendu leaves, scrap, and motor vehicles

TCS Exemptions

TCS exemptions apply in specific cases where tax collection is not required, such as:

Certain government transactions
Buyers using goods for manufacturing, processing, or production instead of resale

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CERTIFICATE

FSSAI & EATING LICENCES

International Organization for Standardization (ISO)

Government e Marketplace (GeM)

Extended producer responsibility (EPR)

ANNUAL FILINGS

RETURNS

AUDIT

Property Matters

Confidentiality

Business & Investment Support

website policy

Employment Documents

Other Legal Documents

trade agreement

Safety & Packaging

Import Monitoring System

Other IEC License

Tax Collected at Source

REGISTER NOW..

Why Should I Use Auriga Accounting For Tax Collected at Source ?

book appointment

Resolve all your queries

Complete your ITR Filing

Why Should I Use Auriga Accounting For Tax Collected at Source ?

book appointment

Resolve all your queries

Complete your ITR Filing

Overview - Tax Collected at Source

Classification of Sellers for Tax Collected at Source (TCS)

Classification of Buyers for Tax Collected at Source (TCS)

Goods Covered Under TCS Provisions

When is Tax Collected at Source (TCS) Collected?

e-TCS (Electronic Tax Collected at Source)

TCS Rates for Different Goods & Services

TCS Return Due Dates

Interest on Non-Payment of TCS

Penalty for Incorrect TCS Filing

Differences Between TDS and TCS

TCS Exemptions

Get more details

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