TCS Return

Tax collection at source (TCS) is an additional amount collected as tax by a seller of specified goods from the buyer at the time of sale over and above the sale amount and is remitted to the government account. As per Income Tax Act 1961 certain persons, being the sellers must collect a specified percentage of tax (as given in para 8 below) at the time of receipt of amount from their buyers or at the time of debiting of the account of the buyer whichever is earlier. Section 206C of the Income Tax Act mentions the particulars of goods, on sale of which tax needs to be collected from the purchasers.

TALK TO AN EXPERT

CALL US

STEP 1

Contact Taxoverse Experts

STEP 2

Provide necessary documents to our technical experts

STEP 3

Get your Work Done hassle-free in a cost-effective manner.

NATURE OF TAX COLLECTION AT SOURCE (TCS)

The person collecting tax has to obtain Tax Collection Account Number (TAN) and quote it in all challans, certificates and returns and all other documents pertaining to the transactions. The buyer shall furnish his Permanent Account Number (PAN) to the seller, failing which tax shall be collected at the higher rate (twice or 5 percent whichever is higher).

TCS RATE

When the below-mentioned goods are utilised for the purpose of manufacturing, processing, or producing things, the taxes are not payable. If the same goods are utilised for trading purposes, then tax is payable. The tax payable is collected by the seller at the point of sale. The rate of TCS is different for goods specified under different categories:

Type of Goods or transactions	Rate
Liquor of alcoholic nature, made for consumption by humans	1%
Timber wood under a forest leased	2.5%
Tendu leaves	5%
Timber wood by any other mode than forest leased	2.5%
Forest produce other than Tendu leaves and timber	2.5%
Scrap	1%
Minerals like lignite, coal and iron ore	1%
Purchase of Motor vehicle exceeding Rs.10 Lakhs	1%
Parking lot, Toll Plaza and Mining and Quarrying	2%
Where total turnover is more than Rs.10 crores in the previous financial year and receives sale consideration of any products of more than Rs. 50 lakhs, such seller must collect TCS upon receiving consideration from the buyer on such amount over and above Rs.50 lakhs, as per Section 206C(IH). (Without PAN, then 1% is TCS)	0.05%

CLASSIFICATION OF SELLERS AND BUYERS FOR TCS

Seller: There are some specific people or organisations who have been classified as sellers for tax collected at the source. No other seller of goods can collect tax at source from the buyers apart from the following list :

Central Government
State Government
Local Authority
Statutory Corporation or Authority
Company registered under the Companies Act
Partnership firms
Co-operative Society
Any person or HUF who is subjected to an audit of accounts under the Income-tax Act for a particular financial year.

Buyer: A buyer is a person who obtains goods of specified nature in any sale or right to receive any such goods, by way of auction, tender or any other mode. However, the below buyers are exempted from the collection of tax at the source.

In other words, TCS need not be collected from the following persons.

Public sector 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
Where resident buyer utilises such purchase for the purposes of manufacturing, processing or producing articles or things or for the purposes of generation of power (not for trading) and gives this declaration in writing in duplicate.

TCS PAYMENT

The seller shall deposit the TCS amount in Challan 281 within one week of the last day of the month in which the tax was collected. This payment can be made in any branch of RBI, SBI or any other authorized bank or the same can also be paid electronically.

All sums collected by an office of the Government should be deposited on the same day of collection.

Failure to make payment to Government Account

If the tax collector responsible for collecting the tax and depositing the same to the Government does not collect the tax then he will be liable to pay interest of 1% per month or a part of the month. In addition to the amount of TCS he failed to collect. If after collecting doesn’t pay the tax to the Government within due dates, then he is liable for interest @ 1% per month of delay (if due date falling between 01.04.2020 to 29.06.2020) rate of interest is 0.75% per month or part of the month.
The person would also be liable for penalty u/s 271CA of the Act, which would be equal to amount of tax liable to be collected.
The person will also be liable to prosecution u/s 276BB of the Act, term of which is upto 7 years of imprisonment.

TCS RETURN DUE DATE & TCS CERTIFICATE

It is mandatory for all collectors of tax to furnish Quarterly TCS returns (Form 27EQ) online to CPC-TDS in electronic mode within the prescribed time. The collector can also file correction statement for rectification of any mistake, add/delete or update the information already furnished.

Filing of TCS return after due date is liable for Late Filing Fee of Rs.200/- per day for the period of delay from due date.

The Collector of TCS has to provide a TCS certificate in Form 27D 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.

Quarter Ending	Due date to file TCS return in Form 27EQ	Date for generating Form 27D
For the quarter ending on 30th June	15th July	30th July
For the quarter ending on 30th September	15th October	30th October
For the quarter ending on 31st December	15th January	30th January
For the quarter ending on 31st March	15th May	30th May

BENNEFITS OF TCS RETURN

Simplified Tax Collection Process: TCS (Tax Collected at Source) returns offer a simplified method of collecting taxes from various specified transactions. By implementing TCS returns, the tax collection process becomes more efficient and streamlined, reducing the burden on taxpayers and ensuring accurate tax reporting.
Enhanced Compliance: TCS returns promote better tax compliance among businesses. By mandating the collection of taxes at the source, it reduces the chances of tax evasion and ensures that the correct amount of tax is collected and remitted to the government. This contributes to a fair and transparent tax system.
Increased Revenue Generation: The implementation of TCS returns enables the government to generate additional revenue by capturing tax liabilities at the source itself. This helps in funding various developmental initiatives and public services, ultimately benefiting the overall economy.
Reduced Taxpayer Liability: TCS returns shift the responsibility of tax collection from individual taxpayers to the collector at the source of income. This reduces the liability on individual taxpayers and simplifies their tax payment process. It also eliminates the need for taxpayers to make separate arrangements for tax collection, making compliance more convenient.
Improved Data Accuracy: TCS returns facilitate the accurate reporting of tax-related information. By implementing a standardized reporting format, it minimizes errors and discrepancies in tax records, ensuring the reliability of data for tax assessment, audits, and analysis.
Efficient Tracking and Monitoring: TCS returns enable tax authorities to effectively track and monitor transactions subject to TCS. This helps in identifying non-compliance, potential tax evasion, and discrepancies in tax collection. It strengthens the government’s ability to enforce tax regulations and take necessary actions against non-compliant entities.
Promotion of Transparency: TCS returns promote transparency in financial transactions. By mandating the collection and reporting of tax at the source, it provides visibility into the flow of funds, making it difficult for businesses to manipulate transactions or hide income, thus reducing the scope for tax evasion.
Simplifies Tax Reconciliation: TCS returns simplify the process of tax reconciliation for both taxpayers and tax authorities. The collected TCS amount is reflected in the taxpayer’s Form 26AS, enabling easy reconciliation with the taxpayer’s income tax liability. This reduces the chances of errors and discrepancies during the reconciliation process.

DOCUMENTS REQUIRED FOR TCS RETURN

TCS Challan Copies: Copies of TCS challans used for depositing the collected tax with the designated bank. These challans serve as proof of tax payment and are essential for reconciling the tax liability.
TCS Certificates: TCS certificates issued by the collector to the person from whom tax has been collected. These certificates provide details of the collected tax, such as the nature of the transaction, the tax rate applied, and the amount collected.
Details of Transactions: Documents or records that provide information about the transactions subject to TCS. This may include invoices, contracts, agreements, or any other relevant documents that support the identification and calculation of the TCS liability.
PAN (Permanent Account Number) Information: PAN details of the person from whom tax has been collected. PAN is crucial for accurately identifying the taxpayer and ensuring proper tax attribution.
Proof of TCS Deposits: Bank statements or challan counterfoils showing the deposit of the collected tax with the designated bank. These documents serve as evidence of the timely remittance of the collected tax.
TCS Return Form: The completed TCS return form as prescribed by the tax authorities. This form contains various details, such as the collector’s and taxpayer’s information, transaction-specific information, tax calculation, and other relevant information necessary for accurate reporting.

FAQs FOR TCS

Q1. What is Tax collection at source (TCS)?

Tax collection at source (TCS) is an extra amount collected as tax by a seller of specified goods from the buyer at the time of sale over and above the sale amount and is remitted to the government account.

Q2. What is tax collected at source in Form 26AS?

Yes, Form 26AS displays details of Tax Collected at Source (TCS) by a seller of specified goods when such goods were sold to you. It will display the seller’s details along with the TCS amount and the transaction on which tax was collected at the source.

Q3. What is tax collected at source with example?

If a buyer is purchasing a car that costs Rs 10.01 lakhs then an amount of Rs 10,010 would be payable as TCS @1%. This amount would need to be submitted to a particular branch of the bank which has been given permission by the government for receiving such payments.

Q4. Which TCS is reflected in 26AS?

The Form 26AS has details of all payments made to you and the TDS on these payments. This includes TDS on interest from deposits and bonds and dividend income. It will also have details of tax collected at source (TCS). You can access your Form 26 AS either through the tax department portal or your Net banking account.

Q5. Who is eligible for tax deducted at source?

The concept of TDS was introduced with an aim to collect tax from the very source of income. As per this concept, a person (deductor) who is liable to make payment of specified nature to any other person (deductee) shall deduct tax at source and remit the same into the account of the Central Government.

Q6. What is the difference between TDS and TCS?

TDS is deducted whenever a payment is due or made, whichever is earlier. TCS is collected by the seller at the time of sale. TDS is to be deducted by the individual (or company) making the payment. TCS is to be collected by the individual (or company) selling the specified goods.

Q7. Can we claim TCS in income tax return?

TCS paid can be adjusted against tax payable, when individuals who would have paid TCS, file income tax returns (ITR) in India.

Q8. Who is exempted from TCS tax?

The income tax department has exempted non-resident corporate entities and firms not having a permanent establishment or a fixed place of business in India from 5% tax collected at source (TCS) on foreign remittances and tour packages, reducing their compliance burden.

Q9. Why is TCS deducted?

TCS is the tax which is collected by sellers while selling something to buyers. TDS deduction is applicable on payments such as salaries, rent, professional fee, brokerage, commission, etc. TCS deduction is applicable on sales of goods like timber, scrap, mineral wood, and so on.

Q10. Can TCS and TDS both be deducted?

If the buyer is liable to deduct TDS, then the seller shall not collect TCS on the same, but if the buyer is not liable for TDS deduction, then the seller must collect TCS u/s 206C(1H).

Q11. Is TCS tax mandatory?

ii) The person would also be liable for penalty u/s 271CA of the Act, which would be equal to amount of tax liable to be collected. It is mandatory for all collectors of tax to furnish Quarterly TCS returns (Form 27EQ) online to CPC-TDS in in electronic form within the prescribed time.

Q12. What is the new TCS rule?

Here, the seller will have to collect tax as TCS at a rate of 0.1% from the buyer when the amount of sale consideration received for ANY goods sold (excluding exports) exceeds INR 50 lakhs. That means TCS applicable on sale consideration that is more than INR 50,00,000.

TCS RETURN