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Tax Collected at Source (TCS) – Rates, PROCESS, and Exemption etc

TCS stands for “Tax Collected at Source.” It is a tax collection mechanism in India that requires the seller of certain specified goods to collect tax at a prescribed rate from the buyer at the time of sale. TCS Filling With “India’s BEST TAX CONSULTANT.” Connect with our Experts.

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Tax Collected at Source (TCS) with Auriga Accounting

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Why Should I Use Auriga Accounting For Tax Collected at Source (TCS) Filling ?

Auriga Accounting has a team of registration experts who can provide complete guidance to  Tax Collected at Source (TCS) Filling.

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Why Should I Use Auriga Accounting For Tax Collected at Source (TCS) Filling ?

Auriga Accounting has a team of registration experts who can provide complete guidance to Tax Collected at Source (TCS) Filling.

book appointment

Our team of experts will get in touch with you and collect all necessary documents and details

Resolve all your queries

We fill out and file your application for registration

Complete your (TCS) Filling .

Your TCS FILLING.

OVERVIEW -TCS

TCS stands for “Tax Collected at Source.” It is a tax collection mechanism in India that requires the seller of certain specified goods to collect tax at a prescribed rate from the buyer at the time of sale. The collected tax is then deposited with the government on behalf of the buyer. TCS is primarily governed by the provisions of the Income Tax Act, 1961, and it is distinct from Tax Deducted at Source (TDS).

TYPES OF TCS

Tax Collected at Source (TCS) in India is applicable to specific transactions and goods as specified by the Income Tax Act, 1961. There are several types of TCS, each corresponding to different categories of transactions and goods. Here are some common types of TCS:

  • TCS on Sale of Motor Vehicles: 
  • TCS on Sale of Alcoholic Liquor for Human Consumption: 
  • TCS on Sale of Scrap:
  • TCS on Sale of Minerals:
  • TCS by E-commerce Operators:
  • TCS on Timber Obtained by Any Mode Other Than Forest Lease:
  • TCS on Tendu Leaves:
  • TCS on Purchase of Luxury Cars: 
  • TCS on Overseas Tour Packages: 
  • TCS on Remittances Under Liberalized Remittance Scheme (LRS): 
  • TCS on Sale of Motor Vehicles: Sellers of motor vehicles are required to collect TCS on the sale of motor vehicles above a specified threshold. As of my last knowledge update in September 2021, the TCS rate is typically 1% for passenger vehicles and 0.1% for two-wheelers. The TCS threshold may vary based on the type of vehicle.
  • TCS on Sale of Alcoholic Liquor for Human Consumption: Businesses involved in the sale of alcoholic liquor for human consumption are subject to TCS at a specified rate. The TCS rate can vary based on the type of alcoholic beverage.
  • TCS on Sale of Scrap: Sellers of scrap are required to collect TCS on the sale of scrap above a certain threshold. The TCS rate for scrap sales can vary based on the type of scrap.
  • TCS on Sale of Minerals: TCS is applicable to the sale of minerals like coal and lignite. The TCS rate and threshold may vary depending on the specific mineral being sold.
  • TCS by E-commerce Operators: E-commerce operators are required to collect TCS on certain transactions conducted through their platforms. This includes transactions involving goods and services sold by third-party sellers on the platform.
  • TCS on Timber Obtained by Any Mode Other Than Forest Lease: TCS is applicable to the sale of timber that is obtained by any mode other than a forest lease. The TCS rate and threshold may vary based on the type of timber.
  • TCS on Tendu Leaves: TCS is applicable to the sale of tendu leaves. The TCS rate and threshold for tendu leaves may vary.
  • TCS on Purchase of Luxury Cars: Buyers of luxury cars (i.e., those with a purchase price above a specified threshold) are required to pay TCS at the time of purchase. The TCS rate may vary based on the cost of the vehicle.
  • TCS on Overseas Tour Packages: TCS is applicable to the purchase of overseas tour packages. Tour operators are required to collect TCS at a specified rate.
  • TCS on Remittances Under Liberalized Remittance Scheme (LRS): Individuals remitting money abroad under the LRS are required to pay TCS if the remittance amount exceeds a certain threshold.

ELIGIBILITY FILLENG TDS

Applicability: TCS is applicable to specific transactions and goods as identified by the Income Tax Act. As of my last knowledge update in September 2021, some common transactions subject to TCS include the sale of:

      • Motor vehicles (above a certain threshold).
      • Scrap.
      • Minerals like coal and lignite.
      • Timber obtained by any mode other than a forest lease.
      • Tendu leaves.
      • Alcoholic liquor for human consumption.
      • Sale of goods over and above a specified threshold by an e-commerce operator.
  • TCS Rate: The rate at which TCS is collected can vary depending on the nature of the transaction and the type of goods involved. It is specified by the government in the Income Tax Rules. If the buyer provides a valid Permanent Account Number (PAN), the TCS rate may be lower; otherwise, it is collected at a higher rate.
  • TCS Collector: The seller or person responsible for collecting TCS is known as the TCS collector. This can be an individual, a company, or an e-commerce platform, depending on the nature of the transaction.
  • TCS Deductee: The buyer or person from whom TCS is collected is known as the TCS deductee. The TCS amount is collected by the seller and deposited with the government on behalf of the buyer.
  • TCS Certificate: The TCS collector is required to issue a TCS certificate to the deductee, indicating the amount of TCS collected. This certificate serves as proof of tax payment and can be used by the buyer while filing their income tax return.
  • TCS Return: The TCS collector is required to file TCS returns with the Income Tax Department, reporting the details of TCS collected and deposited.
  • Adjustment in Income Tax Return: The TCS amount collected can be adjusted against the buyer’s overall income tax liability when they file their income tax return. If excess TCS has been collected, the buyer can claim a refund.

ADVATNAGES OF TDS FILLING

Advantages of TCS for the Government:

  • Revenue Generation: TCS serves as an early collection mechanism for tax revenue. It ensures that the government receives a portion of the tax on certain transactions at the time of sale, rather than relying solely on end-of-year tax filings.
  • Tracking High-Value Transactions: TCS helps the government track high-value transactions in various sectors, such as automobiles, real estate, and e-commerce. This aids in monitoring and regulating sectors prone to tax evasion.
  • Enhanced Compliance: TCS encourages compliance among buyers and sellers. Sellers are incentivized to correctly collect and deposit TCS, while buyers are motivated to provide their Permanent Account Numbers (PAN) to ensure a lower TCS rate.
  • Reduced Tax Evasion: By collecting tax at the source, TCS reduces the chances of tax evasion, as it becomes more challenging for taxpayers to underreport or avoid their tax liability.
  • Streamlined Reporting: TCS reporting and collection are systematized, making it easier for tax authorities to track and analyze tax collections. This streamlining enhances the efficiency of tax administration.
  • Funds for Welfare Programs: The revenue generated through TCS can be used for various government programs and initiatives, including social welfare, infrastructure development, and public services.

Advantages of TCS for Taxpayers:

  • Simplified Tax Payment: For buyers, TCS simplifies the tax payment process. They don’t have to separately calculate and pay the tax; it is collected by the seller at the time of the transaction.
  • Avoiding Penalties: TCS ensures that buyers fulfill their tax obligations. Failure to pay TCS may result in penalties and interest charges, which can be avoided through compliance.
  • Transparent Transactions: TCS promotes transparency in high-value transactions. Buyers receive TCS certificates, providing a clear record of the tax paid, which can be useful for tax return filing and financial documentation.
  • Tax Credit Adjustment: Buyers can adjust the TCS amount collected against their overall income tax liability when filing their income tax returns. If excess TCS has been collected, they can claim a refund.
  • Encourages PAN Submission: Buyers who provide their PAN can benefit from a lower TCS rate. This encourages PAN submission and helps in reducing the overall tax burden.
  • Reduced Tax Evasion Impact: TCS reduces the impact of tax evasion by ensuring that tax is collected at the source. Buyers can have confidence that the seller has complied with tax regulations.
  • Enhanced Tax Compliance Culture: TCS contributes to building a culture of tax compliance among taxpayers, encouraging them to fulfill their tax responsibilities.

Documents TCS FILLING

  • TCS Certificate: The seller (TCS collector) is required to issue a TCS certificate to the buyer (TCS deductee). This certificate serves as proof of tax collection. It includes details such as the amount of TCS collected, the TCS collector’s TAN (Tax Deduction and Collection Account Number), and the TCS deductee’s PAN (Permanent Account Number).
  • Sales Invoices and Receipts: Sellers should maintain sales invoices and receipts that clearly indicate the transaction details, including the TCS amount collected. These documents should be maintained as part of the seller’s financial records.
  • PAN Information: The seller should collect and verify the Permanent Account Number (PAN) of the buyer for TCS purposes. The PAN of the buyer should be mentioned on the sales invoices.
  • TCS Returns: TCS collectors are required to file TCS returns with the Income Tax Department. The records related to TCS returns, including the details of TCS collected and deposited, should be maintained for reference.
  • Purchase and Sale Records: Sellers should maintain records of purchases and sales that are subject to TCS. These records should include information about the goods or services involved, transaction dates, and TCS amounts.
  • Bank Statements: Sellers should retain bank statements and transaction records to demonstrate the collection and deposit of TCS amounts into the designated government account.
  • TAN Certificate: The seller should have a valid Tax Deduction and Collection Account Number (TAN) issued by the Income Tax Department. The TAN certificate should be readily available for verification purposes.
  • Proof of Payment to Government: Evidence of the payment of TCS to the government, such as challans and acknowledgment receipts, should be maintained as proof of compliance.
  • Communication Records: Any communication with the Income Tax Department related to TCS, such as acknowledgment of filings or notices received, should be retained.
  • TCS Compliance Records: Records related to the compliance process, including records of TCS deducted, TCS collected, and TCS returns filed, should be maintained.
  • Audit and Verification Records: In case of an audit or verification by tax authorities, sellers should have all relevant records and documents readily available for scrutiny.

PROCESS OF TDS FILLING.

Step 1: Determine Applicability

First, determine whether your business or transaction is subject to TCS as per the provisions of the Income Tax Act. TCS is typically applicable to certain specified transactions, such as the sale of motor vehicles, minerals, scrap, alcoholic liquor, and certain high-value transactions conducted by e-commerce operators. Ensure that your business falls within the scope of TCS.

Step 2: Obtain a Tax Deduction and Collection Account Number (TAN)

If your business is liable to collect TCS, you must have a valid Tax Deduction and Collection Account Number (TAN) issued by the Income Tax Department. If you already have a TAN for other tax purposes (e.g., TDS), you can use the same TAN for TCS.

Step 3: Maintain Documentation

Maintain proper documentation related to TCS, including sales invoices, receipts, PAN details of buyers, and records of transactions subject to TCS. This documentation will be essential for compliance and reporting.

Step 4: Collect TCS

When conducting transactions subject to TCS, ensure that you collect TCS from the buyer at the prescribed rates. Buyers are required to provide their Permanent Account Numbers (PANs) for TCS purposes.

Step 5: Issue TCS Certificates

Issue TCS certificates to the buyers from whom you have collected TCS. The TCS certificate should include details of the transaction, the amount of TCS collected, your TAN, and the buyer’s PAN.

Step 6: File TCS Returns

TCS collectors are required to file TCS returns with the Income Tax Department. The TCS return should include details of the TCS collected and deposited. There are specific forms for TCS return filing, such as Form 27EQ.

Step 7: Payment of TCS

Ensure that the TCS collected is deposited with the government within the prescribed timelines. Use designated challans for making TCS payments.

Step 8: Compliance and Record-Keeping

Comply with all TCS regulations, maintain accurate records, and be prepared for audits or verification by tax authorities. Keep records of TCS transactions, returns, and communications with tax authorities.

Step 9: Stay Informed

Stay informed about any changes in TCS rates, thresholds, or regulations through official notifications from the Income Tax Department.

Step 10: Seek Professional Guidance

Consider seeking professional guidance from tax experts or chartered accountants who can assist you in understanding and complying with TCS provisions. They can help you navigate the complexities of TCS compliance.

WHY AURIGA ACCOUNTING ?

Auriga Accounting or any other financial and advisory firm may assist businesses and individuals in registering for Tax Collected at Source (TCS) in India by providing specialized services and guidance. Here’s how they can help in the TCS registration process:

  • Assessment of TCS Applicability: Auriga Accounting can assess whether your business transactions or activities fall under the scope of TCS as per the Income Tax Act. They will help you determine if TCS registration is required for your specific situation.
  • TCS Registration Application: Auriga Accounting can assist you in preparing and submitting the TCS registration application to the Income Tax Department. This includes filling out the necessary forms and providing the required documentation.
  • Documentation Preparation: Auriga Accounting can help gather and organize the necessary documentation, such as proof of identity, address, and any other documents required for TCS registration.
  • Compliance with Regulations: Auriga Accounting will ensure that the TCS registration process is in compliance with the latest tax laws and regulations. Staying up-to-date with regulatory changes is crucial to avoid errors and penalties.
  • TAN Application: If you don’t already have a Tax Deduction and Collection Account Number (TAN), which is required for TCS, they can assist in obtaining one.
  • Verification and Follow-Up: Auriga Accounting can follow up with the tax authorities on your behalf to track the status of your TCS registration application and address any issues or queries that may arise.
  • Training and Education: Auriga Accounting may offer training sessions to help you understand the TCS provisions, compliance requirements, and the responsibilities associated with TCS registration and collection.
  • Record Maintenance: Auriga Accounting can guide you on maintaining accurate records related to TCS transactions, certificates, returns, and payments to ensure compliance and easy reporting.
  • TCS Returns and Reporting: Auriga Accounting can assist in filing TCS returns accurately and on time, ensuring that your TCS collections and deposits are in compliance with regulations.
  • Ongoing Support: Auriga Accounting Even after the TCS registration, Auriga Accounting can provide ongoing support and guidance on TCS-related matters, helping you stay updated with changes in tax laws and compliance requirements.
  • Audit Preparation: Auriga Accounting In the event of a tax audit or scrutiny, they can assist in preparing and presenting the necessary documentation and records to tax authorities.

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