TCS full form stands for Tax Collected at Source. The purchaser is responsible for paying the TCS bill, which is collected from the lessee or buyer. Although it is the responsibility of the buyer to pay TCS, the seller is equally liable to collect the TCS duly.
To better understand the mechanism, look at an example. If a box of chocolates costs Rs. 100, the customer will pay Rs. 20 in all, with the Rs. 20 representing the tax received at the source. The money is then sent to a specific branch of a bank that has been approved to accept the payments.
The seller is only responsible for collecting this tax from the buyer; he or she is not responsible for paying it. The tax is intended to be collected while selling merchandise, making purchases, issuing a cash refund from a customer, or issuing a check or draught, whichever method is paid first. The Income Tax Act of 1961, Section 206C, makes this provision.
What is Tax Collected at Source (TCS)?
TCS full form is Tax Collected at Source. It is payable by the seller who collects in turn from the lessee or buyer. The goods are as specified under section 206C of the Income Tax Act, 1961.
Example for Tax Collected at Source
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.
TCS Applicability
Seller Classifications of TCS
The sellers are known as TCs for the purpose of collecting tax at the source. TCS must be collected only by these vendors. The following is a list of those vendors:
- Central Government
- State Government
- Local Authority
- Statutory Corporation or Authority
- Company registered under the Companies Act
- Partnership firms
- Co-operative Society
- Any person or HUF whose accounts are being audited under the Income Tax Act for a specific financial year
– Buyer Classifications of TCS
A buyer is an individual who acquires goods of a specified nature in any certain sale or avails of a right to receive any such goods by way of a tender, auction, or any other way. A few types of buyers, including vendors, are exempted from paying tax at source to the seller:
- Public sector companies
- Central Government
- State Government
- Embassy of High Commission
- Consulate and other Trade Representation of a Foreign Nation
- Clubs such as sports clubs and social clubs
Goods Covered under Tax Collected at Source (TCS)
- Trading of Goods – Since these goods are subject to duty, TCS collected at source will apply when they are used for trading purposes. Trading simply refers to the act of purchasing items from one party and selling them to another.
- Manufacturing, Processing, or Producing Other Products – When the above-mentioned goods are used for the purpose of manufacturing, processing, or producing other goods, they are exempt from tax. As a result, no TCS is needed.
TCS (Tax Collected at Source) Rates in India for FY 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%.
Type of Goods | Tax % |
Liquor of alcoholic nature, made for consumption by humans | 1.00% |
Timber wood when collected from a forest that has been leased | 2.50% |
Tendu Leaves | 5.00% |
Timber wood when not collected from a forest that has been leased, but any other mode | 2.50% |
A forest product other than tendu leaves and timber | 2.00% |
Scrap | 1.00% |
Toll Plaza, Parking lot, Quarrying and Mining | 2.00% |
Minerals that include lignite or coal or iron ore | 1.00% |
Bullion that exceeds over Rs. 2 lakhs/ Jewelry that exceeds over Rs. 5 lakhs. | 1.00% |
TCS Due Dates of FY 2023-24
Quarter | Period | Due Date of Filing |
1st Quarter | 1st April to 30th June | March 31st |
2nd Quarter | 1st July to 30th September | March 31st |
3rd Quarter | 1st October to 31st December | Jan 15th |
4th Quarter | 1st January to 31st March | May 15th |
Certificate of Tax Collected at Source
This certificate must be submitted in Form 27D within a week of the last day of the month in which the tax was paid by individuals or organizations that collect the tax at source. When there are several certificates to be released for a buyer for TCS within the term that ends on September 30 and March 31 for a financial year, a combined certificate will be issued within a month of the last day of the year. The customer would have to order this certificate.
If a TCS certificate is misplaced, the agency in charge of tax collection at the source may issue a new certificate that can be written and attested on plain paper that includes all of the relevant information from Form 27D.
FAQs
What are the repercussions of filing your TCS return late?
A fine of Rs. 200 every day that the failure persists must be paid if the person fails to submit the TCS return by the due period specified in the income tax law.
What is the purpose of tax revenue?
The revenue from income tax collected in advance by the tax department for a fiscal year corresponds to the tax collected at the source. It is used to improve underprivileged areas of society, educate children, build the nation’s infrastructure, etc.