Tax Collected at Source (TCS) - Meaning, Rates, & Due Dates (2024)

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 (Tax Collected at Source) Rates in India forFY 2023-24 (AY 2024-25)

Note that the interest charges for late payment of the TCS to the Government, for every month delayed is 1%.

TCS Due Dates of FY 2023-24

When will the TCS Rate Increase?

As per Section 206CCA, a buyer will be subjected to a higher rate of tax collection at source (TCS) if the following conditions are met:

1. The buyer has not filed Income Tax Returns (ITR) for the two financial years preceding the relevant financial year in which TCS is to be collected.

1. The deadline for filing ITR has lapsed.

1. The total amount of TCS and Tax Deducted at Source (TDS) exceeded Rs. 50,000 in each of these two financial years.

The higher TCS rate will be determined as the highest of the following two rates:

1. Two times the TCS rate specified in the Income Tax Act (as mentioned in the provided table).

1. 5%.

Additionally, under Section 206C(1G), a special case arises where a 5% TCS rate applies. This occurs when an authorized dealer facilitates a remittance out of India amounting to Rs. 7 lakh or more in a financial year from a buyer of foreign currency remitting under the Liberalized Remittance Scheme (LRS), excluding overseas tour program packages.

If the buyer's Aadhaar or PAN information is unavailable, the TCS rate is increased to 10%. TCS is collected either upon debiting the buyer’s account or upon receipt of money.

TCS Payments & Returns

1. Every amount that a government office collect must be deposited the same day it is collected.
2. Within seven days of the final day of the month in which the tax was collected (monthly), the seller deposits the TCS amount in Challan 281.
3. If the tax collector in charge of gathering the tax and depositing it with the government fails to gather the tax or, after collecting it, fails to deposit it with the government by the aforementioned deadlines, he will be required to pay interest at the rate of 1% each month, or a portion of a month.

1. Each tax collector is required to submit a quarterly TCS return, or Form 27EQ, for the taxes they have collected during a specific quarter. Before filing the return, the interest on the TCS payment that was delayed to the government must be paid.

TCS Certificate

1. A TCS certificate must be given to the buyer of the goods when a tax collector files their Form 27EQ, or quarterly TCS return.
2. The certificate provided for submitted TCS returns is Form 27D. The following information is included in this certificate:

1. Names of the Buyer and the Seller

1. TAN of the seller, who is responsible for submitting the TCS return on a quarterly basis.
2. Total tax that the seller has collected
3. Collection date
4. The tax rate that was used

1. This certificate must be granted no later than 15 days after the TCS quarterly returns were submitted. The table below provides a summary of all TCS due dates:

When should TCS be Collected?

The seller is required to collect Tax Collected at Source (TCS) on or before the earlier of the following two dates.

1. When debiting the amount payable by the buyer to their account in the books of accounts.
2. Upon receipt of the payment from the buyer through any mode, including cash, issuance of a cheque, or draft.

In the instance of the sale of a motor vehicle, TCS is collected upon the receipt of payment or consideration for the motor vehicle from the buyer.

Classification of Seller for TCS

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

1. Central Government
2. State Government
3. Local Authority
4. Statutory Corporation or Authority
5. Company
6. Partnership Firms
7. 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:

1. Public Sector Entities or Companies
2. Central Government
3. State Government
4. Embassy of High Commission
5. Consulate and other Trade Representation of a Foreign Nation
6. 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:

1. Liquor of alcoholic nature, made for consumption by humans
2. Timber wood when collected from a forest that has been leased
3. Tendu Leaves
4. Timber wood when not collected from a forest that has been leased, but any other mode
5. A forest product other than tendu leaves and timber
6. Scrap
7. Toll Plaza, Parking lot ticket, Quarrying and Mining
8. Minerals that include lignite or coal or iron ore
9. Bullion that exceeds over Rs. 2 lakhs/ Jewelry that exceeds over Rs. 5 lakhs

Certificate of Tax Collected at Source

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.

Old and New TCS Rates 2024

Tax Collected at Source 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 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.

TCS Exemptions

Tax collection at the source is exempted under the following circ*mstances:

1. When the eligible goods are utilized for personal consumption.
2. When the purchaser acquires the goods for manufacturing, processing, or production purposes rather than for trading them.

TCS allocation for online sales under GST

1. Any dealer or trader conducting online sales through an e-commerce platform will receive payment from the platform after deducting a 1% tax under the Integrated Goods and Services Tax (IGST) Act. This tax comprises 0.5% Central Goods and Services Tax (CGST) and 0.5% State Goods and Services Tax (SGST).
2. The deducted tax amount must be remitted to the government by the 10th of the subsequent month. All dealers and traders are obligated to register under the Goods and Services Tax (GST) regime.
3. These regulations have been in effect since 1 October 2018. For instance, if Mr. Raj, a seller, sells clothes online through Flipkart (an e-commerce operator) and receives an order worth Rs.10,000 inclusive of commission, Flipkart will deduct Rs.100 as tax (1% of Rs.10,000).

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:

1. CD ROM with a capacity >=650 MB
2. A DATA Cartridge which is 4mm 2GB/4GB (90M/120M)
3. 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.

Regulations if TCS is deposited without a challan under section 206C (modifications to Rule 37CA)

1. If TCS has been deposited without a challan, the individual to whom the collector has reported the TCS for depositing to the government must submit Form 24G to the agency authorised by the Principal Director of Income Tax (Systems).
2. Form 24G must be submitted within 15 days from the end of the relevant month. For March, the deadline is 30th April.
3. Form 24G must be issued:
   1. Electronically under digital signature
   2. Electronically along with verification in Form 27A
   3. Verified through an electronic process as prescribed

1. The individual mentioned in the first point must inform the Book Identification number generated to each deductor for whom the deducted sum has been deposited.
2. The Principal Director General of Income Tax (Systems) will specify the procedure for furnishing and verification of Form 24G statements.

Updates on TCS Tax

In Budget 2023, the tax collection at source (TCS) for foreign remittances under the Liberalised Remittance Scheme (LRS) was increased from 5% to 20%. This change will apply to various transactions, including international travel, sending money abroad, and other remittances, except for those made for education and medical purposes. The new regulation is set to come into effect on 1 July 2023.

Interest Chargeable on Non-payment

If a tax collector fails to collect the tax or neglects to remit it to the government within the specified due dates, they will be subject to an interest charge of 1% per month or part thereof.

Penalty for Incorrect Filing of the TCS Return

According to Section 271H, a penalty may be imposed if the tax collector submits an erroneous TCS return. A minimum penalty of Rs.10,000 and a maximum penalty of Rs 1,00,000 may be levied if the collector submits an incorrect TCS return.

Differences between TCS and TDS

The differences between TCS and TDS are given below:

1. TDS stands for Tax Deducted at Source, which refers to the tax withheld from various payments made by a company to an employee. TDS deductions are governed by the Income Tax Act of 1961. On the other hand, TCS, or Tax Collected at Source, is collected by the seller from the buyer at the time of sale of certain specified goods.
2. TCS is applicable to the sale of specific items such as scrap, wood, tendu leaves, minerals, etc., whereas TDS is deducted from various sources including wages, interest, dividends, leases, professional fees, brokerage, commission, etc.
3. TDS is deducted when payments reach a certain threshold, whereas TCS is applied regardless of the payment amount. TCS is collected at a fixed rate depending on the type of product being sold.