Discover TCS Full Form & Product Categories: Learn About Tax Collected at Source & Rates under Section 206C
Last Updated : July 20, 2023, 4:07 p.m.
The 1961 Income Tax Act comprises provisions for collecting tax at source or TCS. Under these provisions, sellers should collect a certain tax percentage from their customers on specific transactions. Many of these transactions are selling or business nature. Tax Collected at Source ranges for all categories of products. The products on which the seller collects tax from the buyer are regulated under Section 206C of the 1961 Income Tax Act. Want to know about Tax Collected at Source? Keep reading the article to learn about TCS full form.
Tax Collected at Source Rates in India
TCS rates in India apply when the products mentioned below are utilised for trading. The Tax Collected at the Source is not payable if these goods are used for producing, manufacturing, and processing other products. The table below shows the product type and TCS rates applicable to each of these below-mentioned goods.
| Product Type | TCS Rate |
|---|---|
| Liquor or alcohol for human consumption | 1% |
| Timber wood purchased under a forest lease | 2.5% |
| Tendu leaves | 5% |
| Forest produce (except Tendu leaves & Timber) | 2.5% |
| Timber wood, except for forest lease | 2.5% |
| Scrap | 1% |
| Bullion more than Rs. 2 lakh/ Jewellery more than Rs. 5 lakh | 1% |
| Parking Area, Quarrying, Toll Plaza and Mining | 2% |
| Minerals like coal, lignite, and iron ore | 1% |
| Car purchases of more than Rs. 10 Lakh | 1% |
| Purchase of cars of over Rs. 2 lakhs | 1% |
When is a High TCS Rate Applicable?
According to Section 206CCA, a high-rated tax will be collected from the purchaser under the following scenarios:
- If the purchaser hasn’t filed the Income Tax Returns for the preceding two fiscal years before the relevant fiscal year in which the Tax Collected at the Source has to be collected
- The time limit to file the Income Tax Returns has expired.
- The overall Tax Collected and Deducted at the Source was above Rs.50,000 in these fiscal years.
Such a high Tax Collected at the Source rate shall be the highest of the two rates mentioned below:
- Twice the TCS rate specified in the 1961 Income Tax Act
- 5%
When Should a Seller Collect TCS?
The seller should collect Tax Collected at Source at the earliest on the two dates mentioned below:
- Upon debiting the amount a purchaser pays to the seller’s account
- Upon money receipt from a purchaser through cash, cheque, or draft.
While selling a motor vehicle, the seller collects the TCS upon money receipt or consideration for the vehicle from the purchaser.
Tax Collected at Source Payments
The amount a Government office collects should be deposited on the collection day. A seller deposits the TCS full form amount in Challan 281 within seven days of the final day of the month the tax collection took place. Suppose the tax collector in charge of collecting the TCS amount and depositing it to the government does the work after the due date. In that case, the tax collector will be accountable for paying a 1% monthly interest. All tax collectors should submit a quarterly Tax Collected at Source return in Form 27EQ concerning the sum the tax collector collects in a certain quarter. The interest on delaying the TCS payment to the government must be paid before filing the return.
Tax Collected at Source Exemptions
Tax Collected at Source is exempted from the following scenarios:
- When the qualified goods are used for personal needs
- The buyer purchases the products for production, manufacturing and processing.
Two Tax Collected at Source exemption types include the lower Tax Collected at Source rate and the overall TCS exemption.
Tax Collected at Source Low Rates
The purchaser can send an application to the Assessing Officer for collecting TCS at low rates using form number 13 under the condition that the AO is convinced that the buyer has a justifiable and stable income source to be eligible for low rates. The AO may issue a certificate comprising the TCS full form rate mentioned with the lower rate application.
Overall Tax Exemption
As a purchaser, you should declare in Form 27C that you qualify for overall exemption from paying Tax Collected at Source. The declaration should mention and prove that the purchased and declared products are for processing and manufacturing, not for selling. Whoever is collecting tax should get a copy of the declaration form, after which the collector must submit the declaration form to the concerned authorities within one week of the next day.
Conclusion
To conclude, Tax Collected at Source is the tax amount a supplier collects from the customer when a buyer buys a particular category of products or services. The product type determines the Tax Collected at the Source rate, and the seller should deposit the tax amount received from the customer to the government. While TCS fulTax Collected Sourcel form might impact consumers directly, it is significant to be updated with the provisions. The concerned purchasers and sellers should know the rules and regulations to follow and obey the laws fairly.
FAQs
1. Should sellers collect Tax Collected at Source on a GST amount?
According to the Income Tax law, a seller shall collect Tax Collected at Source from the purchaser while debiting the payable amount to the purchaser’s account. Therefore, the amount that the seller receives shall be included in GST, Value-added tax, or excise. Thus, sellers should collect Tax Collected at Source, including Goods and Services Tax.
2. Are there any penalties for filing the TCS return inappropriately?
If the tax collector submits incorrect Tax Collected at Source returns, it can lead to penalties under Section 271H.
3. Can you check TCS in form 26AS?
Yes, you can check TCS in form 26AS. Form 26AS comprises TCS details by a seller of certain products when the seller sells you such goods. It will show the seller’s information with the Tax Collected at the Source amount and the transactions on which the tax amount was collected at the source.
4. What are the consequences if an individual files the TCS return after the due date?
If you fail to file the Tax Collected at Source return before the date mentioned in the income tax law, you will need to pay a fine of Rs. 200 daily during the failure tenure. Nevertheless, the late fees amount shouldn’t exceed the TCS amount. Depositing the late filing charges before filing the TCS return is mandatory. Remember that Rs. 200 is not a penalty but a late filing charge.
5. What are the rates of tax under TCS?
The rates specified under Tac Collected at Source are:
- 1%
- 2%
- 2.5%
- 5%