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Tax Collection Source – Latest Notes

Tax Collection Source – Latest Notes: This blog contains the latest amendments on Tax Collection Source (TCS) applicable from 1st June.

tax-collection-source-latest-notes

tax-collection-source-latest-notes

Tax Collected at Source (TCS) is income tax collected by seller in India from payer on sale of certain items. It is provided in section 206C of Income Tax Act 1961. The seller has to collect tax at specified rates from the payer who has purchased these items :

  • Alcoholic liquor for human consumption
  • Tendu leaves
  • Timber obtained under a forest lease
  • Timber obtained by any mode other than under a forest lease
  • Any other forest produce not being timber or tendu leaves
  • Scrap
  • Minerals being coal or lignite or iron ore
  • Scrap Batteries

Classification of Seller for TCS:

The following are people and organisations who are classified as sellers for tax collected at source:

  • Central Government
  • State Government
  • Local Authority
  • Statutory Corporation or Authority
  • Company
  • Partnership Firms
  • Co-operative Society

Any person/HUF who has a total sales/gross receipts that exceeds the specified monetary restricts as mentioned under the Section 44AB in the last year.

Classification of Buyer for TCS:

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A buyer is one who as an individual or single entity obtains goods or even the right of receiving goods at a sale, tender, auction or other modes. The following are people and organisations who are exempted from the classification as buyers for tax collected at source:

  • Public Sector Entities or 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 and Transactions Classified under TCS:

The following are considered for collecting tax at source aka TCS:

  • Liquor of alcoholic nature, made for consumption by humans
  • Timber wood when collected from a forest that has been leased
  • Tendu Leaves
  • Timber wood when not collected from a forest that has been leased, but any other mode
  • A forest produce other than tendu leaves and timber
  • Scrap
  • Toll Plaza, Parking lot ticket, Quarrying and Mining
  • Minerals that include lignite or coal or iron ore
  • Bullion that exceeds over Rs. 2 lakhs/ Jewelry that exceeds over Rs. 5 lakhs

Certificate of TCS:

This certificate needs to be submitted in the Form 27D, within a week’s time from the last date of the month in which that tax had been collected, by people or entities who are collecting the tax at source.

In the period that ends on September 30 and March 31 for a financial year, there are more than one certificates to be issued for a buyer for TCS, a consolidated certificate can be issued within a month from the last day of the period. This certificate has to be requested from the buyer.

In the case where a TCS certificate is lost the entity in charge for the collection of tax at source can issue a duplicate certificate that can be printed and attested on plain paper, along with required details as mentioned in the Form-27D.

TCS Exemptions:

There are two types of exemptions that includes lower rated TCS and total exemption for tax collected at source:

TCS at Lower Rate: The buyer has the provision to apply to the Assessing Officer or AO for collecting the tax at source at a lower rate, with the help of Form No.13, under the liable condition that the Assessing Officer has been convinced that the buyer’s total income is justifiable for the lower rate. The Assessing Officer may as well issue a certificate, that has the rate of tax collection at source specified with the lower rate applied.

Total Tax Exemption: The buyer has to declare in a Form 27C that he is eligible for total exemption from paying TCS. The declaration has to specify and prove that the goods that have been declared are intended for the purposes of processing and manufacturing and not trading. The person or entity collecting the tax also has to be given a duplicate copy of the declaration form, after which the collector has to submit the declaration form to the appropriate authorities within a week of the following day.

Electronic TCS (e-TCS):

When filing TCS returns through electronic media, the process of filing is referred to as e-TCS. It is compulsory for government and corporate collectors to file TCS returns in its electronic form, form and following 2004-2005, financial year. Other collectors have the provision to file TCS returns in physical form or electronic form. The NSDL is in charge for the collection of the e-TCS returns from the collectors for the Income Tax Department.

There are certain TCS specific form formats which should contain all information for filing the TCS returns.

This includes:

  • CD ROM with a capacity >=650 MB
  • A DATA Cartridge which is 4mm 2GB/4GB (90M/120M)
  • 1.44 MB floppy diskette that is 3.5 Inches

The tax returns should be accompanied with a Form No.27B and it should also be verified.

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Tax Collection Source – Latest Notes

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Tax Collection Source - Latest Notes

Tax Collection Source – Latest Notes

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Important Note – Preparing for CA Final?
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