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Brief Note on Tax Collected at Source with Applicable Rates from 1 st April 2021

Brief Note on TCS with Applicable Rates from 1st April 2021

TCS or Tax Collected at Source is a tax levied by the government of India. Tax collected at source (TCS) is the tax payable by a seller which he collects from the buyer at the time of sale. These goods or commodities are listed under Section 206C of the Income Tax Act, 1961.

Seller for the Purpose of TCS:

  • A seller is categorized as any individual or organization authorized under Tax Collected at Source. The following are defined as Sellers:
  1. Central Government;
  2. State Government;
  3. Statutory Corporation or Authority;
  4. Local Authority;
  5. Company registered under Companies Act;
  6. Co-operative Society;
  7. Partnership Firms;
  8. Any Individual or Hindu Undivided Family (HUF) defined under the Section 44AB, who has gross receipts or total sales that exceed the specified financial restricts based on the previous year.

 

Buyer for the purpose of TCS:

  • A buyer is categorized as any individual, who receives the actual goods or the rights of receiving goods at a tender, auction, sale, or other modes.
  • All individuals (except for the below mentioned list of individuals and organizations) are classified as buyers for TCS.

 

Exception from Buyer for the purpose of TCS:

The following buyers are exempted from the provisions of TCS:

  • Public Sector Entities;
  • Central Government;
  • State Government;
  • Consulates and any other Trade Representations of a Foreign Nation;
  • High Commission Embassies;
  • Clubs such as social clubs or sports clubs.

 

Goods and/or Transactions Covered under TCS:

The following goods and/or transactions are covered under Tax Collected at Source:

  • Liquors of alcoholic nature including IMFL (Indian Made Foreign Liquor) that are deemed for human consumption;
  • Timber wood obtained from a leased forest area;
  • Tendu Leaves;
  • Timber wood obtained from any mode other than leased;
  • Forest produces (other than timber and Tendu leaves);
  • Scrap;
  • Parking lot tickets, Toll Plaza, Mining and Quarrying;
  • Minerals that include iron ore, lignite or coal;
  • Bullion having valuation over Rs. 2 lakh;
  • Jewellery whose value exceeds Rs. Five lakhs;
  • Motor vehicle sales over Rs. 10 Lakhs.

 

TCS Rates effective from 1st April 2021: 

Goods/Services Rate
Sale of Tendu leaves 5%
Sale of Timber obtained under a forest lease 2.5%
Sale of Timber obtained by any other mode 2.5%
Sale of Any other forest produce not being timber/tendu leaves 2.5%
Sale of scrap 1%
Sale of Minerals, being coal or lignite or iron ore 1%
Grant of the license, lease, etc. of Parking lot 2%
Grant of the license, lease, etc. of Toll Plaza 2%
Grant of license, lease, etc. of Mining and quarrying 2%
Sale of motor vehicle above 10 lakhs 1%
Sale of any other goods exceeding Rs. 50 Lakhs 0.1%
Bullion having valuation over Rs. 2 lakh 1%
Jewelry whose value exceeds Rs. Five lakhs 1%
Liquors of alcoholic nature including IMFL (Indian Made Foreign Liquor) that are deemed for human consumption 1%

 

TCS Payment Due Date:

• The seller collecting TCS is liable to remit the amount so collected as TCS to the Government’s account within 7 days from the end of the month in which TCS is collected.
• The TCS can be remitted by the seller in Challan 281.

TCS Return Filing Due Dates:

• Every tax collector has to submit quarterly TCS return i.e. in Form 27EQ in respect of the tax collected by him in a particular quarter.
• TCS Return must be filed by the seller on quarterly basis on following dates:

Quarter Due Date
1st Quarter – From April to June 15th July
2nd Quarter – From July to September 15th October
3rd Quarter – From October to December 15th January
4th Quarter – From January to March 15th May

 

Non-Collection / Non-Payment of TCS:

Nature of Default

Interest Rate

Non Collection of TCS

If the tax collector responsible for collecting the tax and depositing the same to the government does not collect the tax.

1% per month or a part of the month till such default continues.

Non-Payment

If the tax collector responsible for collecting the tax and depositing the same collects TCS but does not pay the same the Government.

 

Note: Such interest must be paid before filing of the return.

TCS Certificate:

  • When a tax collector files his quarterly TCS return i.e.  Form 27EQ, he has to provide a TCS certificate to the purchaser of the goods.
  • Form 27D is the certificate issued for TCS returns filed. This certificate contains the following details:
  • Name of the Seller and Buyer;
  • TAN of the seller i.e. who is filing the TCS return quarterly;
  • PAN of both seller and buyer;
  • Total tax collected by the seller;
  • Date of collection;
  • The rate of Tax applied.

 

This certificate has to be issued within 15 days from the date of filing TCS quarterly returns. The due dates are:

Quarter

Due Date

1st Quarter – From April to June

30th July

2nd Quarter – From July to September

30th October

3rd Quarter – From October to December

30th January

4th Quarter – From January to March

30th May

 

Difference between TDS and TCS:

Tax Deducted at Source

Tax Collected at Source

Definition

Tax deducted on payments made by companies and individuals if the payment exceeds a threshold.

Tax collected by a seller when selling goods to a buyer.

Deducted/

Collected by

Deducted by Buyer/Recipient of Service

Collected by Seller

Tax Credit Available to

Seller/Service Provider

Buyer

Time of Deduction/

Collection

At the time of Payment or Receipt of Invoice whichever is earlier.

At the time of Invoice generation or receipt of consideration.

When does liability arise?

When consideration for relevant goods/service exceed certain specified threshold limit.

On the sale of specified goods and also based on specified threshold limit.

Example

TDS deductions are made on payments including salary, rent, brokerage, professional fees, commission, interest etc.

TCS deductions are made on the sale of goods such as scrap, timber, mineral wood, tendu leaves etc.

 

TCS under GST:

  • Any dealer or traders selling goods online would get the payment from the online platform after deducting an amount tax @ 1 % under IGST Act (0.5% in CGST & 0.5% in SGST).
  • The tax would have to be deposited to the government by 10th of the next month.
  • All the dealers/traders are required to get registered under GST compulsorily.
  • These provisions are effective from 1st Octobe 2018.

 

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