12/10/2018 Tax Collected at Source ( TCS ) - Payment, Exemption & Rates

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

Tax Collected at Source ( TCS ) –

Payment, Exemption & Rates
Updated on Sep 25, 2018 - 02:13:14 PM

Indian Income Tax act has the provisions for tax collection at source. In these provisions, certain
persons are required to collect a specified percentage of tax from their buyers on exceptional
transactions. Most of these transactions are trading or business in nature. It does not affect the
common man. In this article we will cover:

1. Tax collected at source (TCS)

2. Goods covered under TCS provisions and rates applicable to them
3. Classification of Sellers and Buyers for TCS
4. TCS Payments & Returns
5. Certificate of TCS

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6. TCS Exemptions
7. TCS under GST

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1.Tax collected at source (TCS)

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.

2. 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 :

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12/10/2018 Tax Collected at Source ( TCS ) - Payment, Exemption & Rates

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 that exceeds over Rs. 2 lakhs/ Jewellery that exceeds over Rs. 5 lakhs 1%

Purchase of Motor vehicle exceeding Rs. 10 Lakhs 1%

Parking lot, Toll Plaza and Mining and Quarrying 2%

3. Classification of Sellers and Buyers for TCS

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

1. Central Government

2. State Government

3. Local Authority

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4. Statutory Corporation or Authority

5. Company registered under Companies Act

6. Partnership firms 


7. Co-operative Society

8. Any person or HUF who is subjected to an audit of accounts under Income tax act for a particular financial
year.

Similarly, only a few buyers are liable to pay the tax at source to the sellers.

Let us know who are those buyers:

1. Public sector companies

2. Central Government

3. State Government

4. Embassy of High commision

5. Consulate and other Trade Representation of a Foreign Nation

6. Clubs such as sports clubs and social clubs

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12/10/2018 Tax Collected at Source ( TCS ) - Payment, Exemption & Rates

4. TCS Payments & Returns

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

Do you have any questions about tax or

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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

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December 7th January

January 31st March 7th February 15th March

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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 in Challan 281 (https://cleartax.in/s/tds-challan-itns-281) within 7 days
from the last day of the month in which the tax was collected.

c. Note: If the tax collector responsible for collecting the tax and depositing the same to the government does
not collect the tax or after collecting doesn’t pay it to the government as per above due dates, then he will be
liable to pay interest of 1% per month or a part of the month

d. Every tax collector has to submit quarterly TCS return i.e in Form 27EQ in respect of the tax collected by
him in a particular quarter. The interest on delay in payment of TCS to the government should be paid before
filing of the return.

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12/10/2018 Tax Collected at Source ( TCS ) - Payment, Exemption & Rates

5. Certificate of TCS
1. When a tax collector files his quarterly TCS return i.e Form 27EQ, he has to provide a TCS certificate to the
purchaser of the goods.

2. Form 27D is the certificate issued for TCS returns filed. This certificate contains the following details:

a. Name of the Seller and Buyer

b. TAN of the seller i.e who is filing the TCS return quarterly

c. PAN of both seller and buyer

d. Total tax collected by the seller

e. Date of collection

f. The 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 15th August

For the quarter ending on 30th September 15th November

For the quarter ending on 31st December 15th February

For the quarter ending on 31st March 15th June

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

6. TCS Exemptions

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Tax collection at source is exempted in the following cases :

1. When the eligible goods are used for personal consumption

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2. The purchaser buys the goods for manufacturing, processing or production and not for the purpose of
trading of those goods.

7. TCS under GST

a. Any dealer or traders selling goods online would get the payment from the online platform after deducting an
amount tax @ 1 % under IGST Act. (0.5% in CGST & 0.5% in SGST)

b. The tax would have to be deposited to the government by 10th of the next month.

c. All the dealers/traders are required to get registered under GST compulsorily.

d. These provisions (https://cleartax.in/s/tds-and-tcs-under-gst) are effective from 1st Oct 2018.

Example: Mr. Raj(seller) is a trader who sells clothes online on Flipkart (buyer). He receives an order for Rs
10, 000 inclusive of tax and commission. Flipkart would thus be deducting tax for Rs 100 (1% of Rs. 10000).

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