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Tax Collection at Source (TCS) in India means the collection of tax at source by the seller of the commodity.
Tax Collection at Source
Tax Collection at Source or TCS, as the name implies, means collection of tax at source by the seller or collector, from the buyer of the goods. As prescribed under Income Tax Act 1961, it is mandatory on the part of the buyer to pay a predetermined value of TCS to the seller, while purchasing a particular commodity. TCS is generally set for business or trade in alcoholic liquor, forest produce, scarp, etc. Various lease, license and contracts related to areas like parking lot, mines and toll plaza also falls under the umbrella of TCS in India.
TCS is generally collected when amassed or when paid, whichever is earlier. The seller or collector who collects the tax is required to deposit it in any of the designated branches of the certified banks. Tax Collection at Source is implemented to curb tax evasion and also to facilitate proper tax collection in India. The various goods which come under the policy of TCS are listed below along with their rates.
Seller
The list of people for coverage under the scope of the seller for TCS is:
- The Central and State Government.
- Local authority.
- Statutory Corporation or Authority.
- Company.
- Firm.
- Co-operative society.
- Individual or Hindu undivided family (HUF) if covered under section 44AB (mandatory Audit).
Buyer
A buyer is one who gets in any sale by way of auction, tender or any other mode, specified goods or right to receive any such goods, but will not include
- Public sector Company.
- Central/ state Government.
- Embassy, a high commission, legation, consulate and the trade representation of a foreign state and
- A club.
- A buyer in the retail sale of such goods purchased for personal consumption.
Tax Collection At Lower Rate
- For tax collection at lower rate, a buyer can apply to his Assessing Officer in Form 13.
- After receiving application on Form 13, if the Assessing officer is satisfied, the assessing officer would issue such certificate directly to seller under advice to the buyer. The said rate is applicable for a particular seller, whose name is mentioned in the certificate and cannot be taken as all prevailing approval for all sellers for purchase of specified goods from anybody.
Exemption
- A buyer who purchases specified goods for manufacturing, processing or production of goods/article or thing and not for trading, no tax would be deducted. In such cases the buyer would declare it in Form 27C to the seller.
- The seller in turn would deliver one copy of Form 27C collected from buyer to Chief Commissioner/Commissioner of Income tax.
| Nature Of Goods |
Percentage/Rate Of Tax |
| Alcoholic Liquor |
1 |
| Timber Obtained Under Forest Lease |
2.5 |
| Timber obtained by any other mode |
2.5 |
| Tender Leaves |
5 |
| Other Forest Produce, excluding Tender leaves and Timber |
2.5 |
| Scrap |
1 |
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