WHAT IS TCS? ITS RATE, EXEMPTION & APPLICABILITY

TCS

1. What do you mean by TCS?

TCS stands for Tax collected at Source. TCS is a kind of tax that is collected by the seller from the buyer on sale of certain type of goods if the amount exceeds a specified limit, so that it can be deposited to the government.

TCS is required to be collected at the source if the value of transaction exceeds a specified amount.

The purchaser can claim this tax collected by the seller while paying his income tax liability for the year, and if the TCS collected is more than the income tax liability of the assessee then he/ she will be entitled to a refund.

The main purpose of introduction of TCS was to reduce the Tax evasion by the person receiving the income.

Note: -

Seller- A seller who sells specific goods and is responsible for collection of tax from the purchaser.

Purchaser- A purchaser is the person who buys specific goods from seller is responsible for paying TCS amount to seller.

2. When to deduct TCS?

TCS requirement arises:

• Debiting the money payable by the buyer to their accounts in books.

            Or

• Upon receipt of such money from the buyer in any mode, whichever is earlier.

          NOTE: -

       In case of motor vehicle sale, the TCS is to be collected upon receipt of money

3. Types of TCS and different rates?

There are more than 20 sections of TCS below are few examples of commonly used TCS rates: -

            All TCS rates are fixed rates i.e. 0.1%, 2.5%, 5% etc. but if payment is made to Non-Resident/ Foreign Company or payment of salary the surcharge & HEC (Health & Education Cess) shall be considered.

4. Due dates to deposit TCS?

The due date to deposit TCS is as Follows: -

5. What are the due dates of filing of TCS returns?

TCS is to be deposited monthly on the dates mentioned above but the return is to be filed quarterly on or before the below mentioned dates; -

6. What happens if TCS is not deducted or deducted but not deposited on or before due date?

Following penalties will be levied if there is delay in TCS deduction or delay in deposit of TCS.

7. Different types of TCS returns?

Following are the TCS returns that are used for different purposes.

8. When will higher TCS rate apply?

If the purchaser falls under the below mentioned condition, then TCS rate will be: -

• Two times the TCS rate mentioned in the Income Tax, or
• 5%    Whichever is higher.

In special cases under Section 206C(1G), 5% TCS applies where the authorized dealer arranges remittance out of INDIA of Rs. 7,00,000 or more in a financial year from a buyer of foreign currency remitting under LRS, not being the overseas tour program package. If Aadhar or PAN is unavailable, the TCS rate will be 10%.

As per Section 206CCA, tax at a higher rate (other than rates mentioned above in table) will be collected from the buyer if such buyer has-

• Not filed ITR for the last two financial years before the Financial Year in which TCS had to be collected.
• The time limit to file ITR has expired.
• The total of TCS and TDS was more than Rs. 50,000 in each of the two Financial Year.

9. TCS Exemptions?

Tax collection at source is exempted in the following cases: -

• When the eligible goods are used for personal consumption.
• The purchaser buys the goods for manufacturing, processing or production and not for the purpose of trading of those goods.