Concept of Tax Collected at Source and TCS Rates in India

TCS is a short form for Tax Collected at Source. This tax is payable by the seller who collects in turn from the lessee or buyer. The goods are as specified under section 206C of the Income Tax Act, 1961.

Let’s take an example to better understand the process. If the purchase value of a box of chocolates is Rs. 100, the buyer ultimately pays Rs. 20 where the Rs. 20 is the tax collected at source. The amount is then given to certain designated branch of banks who have been given the authorization to receive the payments. The seller is only responsible for the collection of this tax from the buyer and actually not paying it himself or herself. The tax is meant to be collected when selling goods, transactions, when issued a receipt of a sum in cash from the buyer or when issuing a cheque or draft, whichever mode is payed by the earliest.

This provision is made under the Section 206C of the Income Tax Act, 1961.

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 when collected from a forest that has been leased	2.50%
Tendu Leaves	5.00%
Timber wood when not collected from a forest that has been leased, but any other mode	2.50%
A forest produce other than tendu leaves and timber	2.00%
Scrap	1.00%
Toll Plaza, Parking lot, Quarrying and Mining	2.00%
Minerals that include lignite or coal or iron ore	1.00%
Bullion that exceeds over Rs. 2 lakhs/ Jewelry that exceeds over Rs. 5 lakhs.	1.00%

Classification of Seller for TCS:

The following are people and organizations who are classified as sellers for tax collected at source:

• Central Government
• State Government
• Local Authority
• Statutory Corporation or Authority
• Company
• Partnership Firms
• Co-operative Society

Any person/HUF who has a total sales/gross receipts that exceeds the specified monetary restricts as mentioned under the Section 44AB in the last year.

Classification of Buyer for TCS:

A buyer is one who as an individual or single entity obtains goods or even the right of receiving goods at a sale, tender, auction or other modes. The following are people and organizations who are exempted from the classification as buyers for tax collected at source:

• 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 aka TCS:

• Liquor of alcoholic nature, made for consumption by humans
• Timber wood when collected from a forest that has been leased
• Tendu Leaves
• Timber wood when not collected from a forest that has been leased, but any other mode
• 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/ Jewelry that exceeds over Rs. 5 lakhs

Certificate of TCS:

This certificate needs to be submitted in the Form 27D, within a week’s time from the last date of the month in which that tax had been collected, by people or entities who are collecting the tax at source.
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 the case where a TCS certificate is lost the entity in charge for the collection of tax at 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 includes lower rated TCS and total exemption for tax collected at source:
TCS at Lower Rate: The buyer has the provision to apply to the Assessing Officer or AO for collecting the tax at source at a lower rate, with the help of Form No.13, under the liable condition that the Assessing Officer has been convinced that the buyer's total income is justifiable for the lower rate. The Assessing Officer may as well issue a certificate, that has the rate of tax collection at source specified with the lower rate applied.
Total Tax Exemption: The buyer has to declare in a Form 27C that he is eligible for total exemption from paying TCS. The declaration has to specify and prove that the goods that have been declared are intended for the purposes of processing and manufacturing and not trading. 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):

When filing TCS returns through electronic media, the process of filing is referred to as e-TCS. It is compulsory for government and corporate collectors to file TCS returns in its electronic form, form and following 2004-2005, financial year. Other collectors have the provision to file TCS returns in physical form or electronic form. The NSDL is in charge for the collection of the e-TCS returns from the collectors for 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 tax returns should be accompanied with a Form No.27B and it should also be verified.

Tax Collected at Source on Gold / Jewelry (TCS on Gold):

The tax collected on Bullion that exceeds over Rs. 2 lakhs and Jewelry that exceeds over Rs. 5 lakhs is collected at 1% of the amount being considered.