Tax Collected at Source (TCS) in India: Guide
What is TCS (Tax collected at source)?
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Introduction
Tax collected at Source or TCS comes under Section 206C of the Income Tax Act, 1961. It mandates sellers to collect tax from buyers on the sale of specific goods and services.
What is tax collected at source:
TCS is a legal provision that compels the seller to collect tax from the payer on the sale of certain goods and services. TCS is not an additional or separate tax but is a part of the income tax payments, which the buyer can later claim credit for when filing their annual income tax returns. To understand how TCS works, let’s consider the example
For Example:
Imagine you are indulging in the ultimate getaway, booking an overseas tour package that comes to a lavish INR 20 lakh, plus TCS, which is calculated on the excess amount. Since your spending is beyond the INR 7 lakh threshold, TCS will be charged at 5% on the first INR 7 lakh and 20% on the remaining INR 13 lakh. That adds up to INR 2,60,000 as TCS (INR 35,000 for the first INR 7 lakh and INR 2,25,000 for the remaining INR 13 lakh). Therefore, the total payment is INR 22,60,000.
Defining the Seller
In the context of TCS, the ‘seller’ is not just limited to a person or entity that engages in the sale of goods or services in the conventional sense. The definition is expansive and includes:
- Central and State Governments
- Public Sector Companies
- local Authority
- Companies registered under the Companies Act
- Statutory corporation or Authority
- Partnership firms
- Cooperative society
- Individuals or a Hindu Undivided Family (HUF) selling goods or services specified under Section 206C.
Understanding the Buyer
The term ‘buyer’ refers to any person who pays to obtain goods or rights in goods from the seller. Only a few must pay tax such as Individual consumers, businesses, manufacturers, traders. TCS is not necessary for the following buyers:
- Public sector companies
- Central government
- State Government
- Embassy or High commission
- Consulate & Trade representative foreign nation
- Social and Sports Clubss
TCS Rates
The Tax Collected at Source (TCS) rates applicable from April 1, 2021, for different categories of goods and services in India are designed to collect taxes at the point of sale, effectively bringing forward tax revenue collection for the government.
| Sl. No. | Nature of Goods | Rate |
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TCS Return Due Dates
Below is the table that lists these due dates for the filing of TCS returns for different quarters of a financial year:
| Quarter | Period | Due Date for TCS Return Filing |
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The penalty provisions related to Tax Collected at Source (TCS) under the Indian Income Tax Act, Here’s a breakdown of the consequences for not adhering to the TCS regulations:
- Failure to Collect TCS
- Interest for Delayed Payment (under Section 220(2) of the Income Tax Act)
- Penalty for Late Filing of TCS Return
- Penalty for Incorrect Information in TCS Return
- Prosecution for Failure to Collect or Pay TCS (Section 276B of the Income Tax Act )
