Tax Collected at Source ( TCS ) – Payment, Exemption & Rates

Tax collected at source (TCS) is the tax payable by a seller which he collects from the buyer at the time of sale. Section 206C of the Income-tax act governs the goods on which the seller has to collect tax from the purchasers.

Goods covered under TCS provisions and rates applicable to them

When the below-mentioned goods are utilized for the purpose of manufacturing, processing, or producing things, the taxes are not payable. If the same goods are utilized 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	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%
A forest produce other than Tendu leaves and timber	2.5%
Scrap	1%
Minerals like lignite, coal and iron ore	1%
Bullion over Rs. 2 lakhs / Jewellery over Rs. 5 lakhs	1%
Purchase of Motor vehicle exceeding Rs. 10 Lakhs	1%
Parking lot, Toll Plaza and Mining and Quarrying	2%

Classification of Sellers and Buyers for TCS

Only the following are allowed to collect TCS:

Central Government
State Government
Local Authority
Statutory Corporation or Authority
Company registered under Companies Act
Partnership firms
Co-operative Society
Any person or HUF under Income tax audit for that year

Buyers liable to pay TCS:

Public sector companies
Central Government
State Government
Embassy or High Commission
Consulate and Trade Representation of a Foreign Nation
Clubs (sports and social)

TCS Payments & Returns

a. The dates for paying TCS to the government are:

Collection Month	Quarter Ending	Due Date of Payment	Due Date of Filing Return
April	30th June	7th May	15th July
May		7th June
June		7th July
July	30th September	7th August	15th October
August		7th September
September		7th October
October	31st December	7th November	15th January
November		7th December
December		7th January
January	31st March	7th February	15th May
February		7th March
March		7th April

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

b. The seller deposits the TCS amount using Challan 281 within 7 days from the last day of the month in which tax was collected.

c. Note: If the tax collector fails to collect or deposit the tax in time, he will be liable to pay interest of 1% per month or part of the month.

d. Every tax collector must submit a quarterly TCS return (Form 27EQ). Interest on delayed payments must be paid before filing the return.

Certificate of TCS

1. After filing the quarterly TCS return (Form 27EQ), the tax collector must issue a TCS certificate (Form 27D) to the purchaser.

2. Form 27D includes:

Name of the Seller and Buyer
TAN of the seller
PAN of both seller and buyer
Total tax collected
Date of collection
Rate of Tax applied

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

Quarter Ending	Date for generating Form 27D
For the quarter ending on 30th June	30th July
For the quarter ending on 30th September	30th October
For the quarter ending on 31st December	30th January
For the quarter ending on 31st March	30th May

In case you are still confused about filing TCS returns, feel free to consult the tax experts at ClearTax.

TCS Exemptions

Tax collection at source is exempted in the following cases:

When the eligible goods are used for personal consumption
When the purchaser buys the goods for manufacturing, processing, or production and not for trading

TCS under GST

a. Any dealer or trader selling goods online receives payment from the platform after deducting 1% TCS under IGST (0.5% CGST + 0.5% SGST)
b. This tax must be deposited with the government by the 10th of the next month
c. Dealers/traders must register under GST compulsorily
d. These provisions are effective from 1st Oct 2018

Example: Mr. Raj (seller) sells clothes online via Flipkart (buyer). For an order of Rs. 10,000, Flipkart deducts Rs. 100 as TCS (1% of Rs. 10,000).

Submission of Form 24G

In the case of a government office where tax is paid without using a bank challan, Form 24G must be submitted as per the following rules:

Rules where TDS is deposited without challan (Rule 30)

a. Person to whom TDS is reported must submit Form 24G to an authorised agency [Rule 30(4)]
b. Form 24G must be submitted within 15 days from the end of the relevant month (for March, by 30th April)
c. The form must be submitted either:
- (i) electronically with digital signature
- (ii) electronically with Form 27A verification
- (iii) through other prescribed electronic verification methods
d. Book Identification Number (BIN) must be communicated to each deductor
e. Principal Director General of Income Tax (Systems) will define procedures for submission and verification

Rules where TCS under section 206C is deposited without challan (Rule 37CA)

a. Person to whom the collector reports TCS must submit Form 24G to authorised agency
b. Must be submitted within 15 days of the end of the relevant month
c. For the month of March, the deadline is 30th April
d. Form 24G must be:
- (i) submitted electronically with a digital signature
- (ii) or with Form 27A verification
- (iii) or via a prescribed electronic process
e. BIN must be shared with all deductors
f. Principal Director General of Income Tax (Systems) will define procedures for submission and verification

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