• Jun 15,2024

Tax Collected At Source (TCS)

Understanding Tax Collected at Source (TCS)

TCS is a tax collection mechanism where tax is collected at the source on specified transactions, requiring the collector to gather tax from buyers and remit it to the government, akin to TDS.

1. Applicability:

TCS applies to specific transactions specified under the Income Tax Act, 1961, including the sale of goods, provision of services, and other transactions such as sale of scrap, minerals, forest produce, etc.

2. Specified Transactions:

The Income Tax Act specifies certain transactions where TCS is applicable, such as sale of alcoholic liquor for human consumption, scrap, timber, minerals, tendu leaves, parking lot, toll plaza, and sale of motor vehicles exceeding specified limits.

3. Tax Collection Rates:

The rates at which TCS is collected vary depending on the nature of the transaction and are prescribed by tax authorities. 

Different rates may apply to different types of transactions.

4. TCS Collection Process:

The person or entity making the sale (referred to as the collector) is responsible for collecting TCS from the buyer at the prescribed rate at the time of sale or provision of service.

The collector must obtain a Tax Collection and Collection Account Number (TAN) from the tax authorities and use it for reporting and remitting TCS.

The collected TCS amount is then remitted to the government within the specified due dates along with the TCS return containing details of collections made.

5. TCS Certificate:

After collecting TCS, the collector issues a TCS certificate to the buyer containing details of the TCS collected. 

The buyer can claim credit for the TCS amount while filing their income tax return.

6. Compliance and Penalties:

Failure to collect TCS or remit the collected TCS to the government within the specified due dates may attract penalties, interest charges, and other consequences as per tax laws.

7. TCS Returns:

Collectors are required to file TCS returns periodically, providing details of TCS collections made during the reporting period. 

These returns are filed electronically through the tax department's online portal.

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