TAX COLLECTION AT SOURCE(TCS) PROVISIONS & TCS RATES

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Dear Friends ,
we have generally learn about tds (Tax Deducted at source ) but as per section 206C ,tax is to collected on sale also ,the concept of TDS and TCS is to get tax collected from the assessee so that he must be assessed under the Income tax act and scope of the income tax can be widened.In this post I have try to explain the main provisions relating to Tax collected at Source i.e TCS.

MAIN SECTION
:Every person,being a seller ,shall collect tax at source(TCS) from the buyer of goods specified in section 206C(1).

Who is Seller?:
following persons are covered under the scope of the seller for TCS purpose
  1. The Central And State Government.
  2. Local authority
  3. Statutory corporation or Authority
  4. Company
  5. Firm
  6. Co-operative society
  7. Individual or Hindu undivided family(HUF) if covered under section 44AB (mandatory Audit)

Who is Buyer ?
  • Buyer Means a person who obtains in any sale,by way of auction,tender or any other mode,specified goods ,or right to receive any such goods
  • but does not include
  1. Public sector company,
  2. Central/state Government,
  3. Embassy,a high commission,legation,consulate and the trade representation of a foreign state and
  4. A club
  5. A buyer in the retail sale of such goods purchased for personal consumption
so goods purchased by consumers are not covered under TCS

Specified Goods
  1. Alcoholic Liquor for human consumption
  2. Tendu Leaves
  3. Timber obtained under a forest lease
  4. Timber obtained by any other mode
  5. Any other forest produce not being a Timber or tendu leave:forest produce means grown spontaneously,though a latter stage human efforts are required /applied in order to extract the resultant product.TCS is applicable on Forest produce and not on agriculture produce.
  6. Scrap:means waste and scrap from the manufacture or mechanical working of material which is definitely not usable as such because of breakage ,cutting up,wear and other reasons.
When tax has to be collected.
  • Tax(TCS) has to be collected at the time of debiting of the amount payable to buyer or at the time of receipt of payment,which ever is earlier.
Tax Rate
  1. Alcoholic Liquor for human consumption:one percent(1%)
  2. Tendu Leaves(five percent,5%)
  3. Timber obtained under a forest lease:(two and half percent,2.5 %)
  4. Timber obtained by any other mode:(two and half percent,2.5 %)
  5. Any other forest produce not being a Timber or tendu leave::(two and half percent,2.5 %)
  6. Scrap::one percent(1%)
plus surcharge(if applicable) 10 %on basic rate given above
plus education cess 2 % on basic plus surcharge
plus secondary and higher education cess 1 % on basic plus surcharge amount

Tax collection at lower rate
  • A buyer can apply to his Assessing Officer in Form 13 for tax collection at lower rate.
  • on receiving application on Form 13 ,Assessing officer ,if satisfied,may issue such certificate directly to seller under advice to the buyer.This rates is applicable for a specific seller,who's name is given in the certificate and not applicable as blanket approval for purchase of specified goods from any body.
Exemption/Nil rate.
  • No tax will be deducted from a buyer who purchases specified goods not for the purpose of trading but for the manufacturing,processing,or production of goods/article or thing.
  • In this case Buyer gives a declaration, for above use, in duplicate in Form 27C to the seller.
  • The seller shall deliver one copy ,form 27C collected from buyer, to Chief Commissioner/ Commissioner of Income tax .
Tax deduction & collection Account Number:(TDCAN better known as TAN)
  • Every person collecting tax (TCS) at source shall apply in form 49B to the assessing officer.TAn(tax deduction account ) issued after 1.10.2004 are combined for TDS as well as TCS
  • TDCAN/TAN should be written on all challan,return and TDS/TCS certificate issued .
  • penalty for failure to obtain TDCAN is 10000 Rs.No penalty shall be imposed on the person if he proves that there was reasonable cause for the failure.
  • If a person quote wrong Tan on a document where tan required to be quoted ,penalty may be imposed of rs 10000 u/s 273B for each occasion on which the default occurs.No penalty shall be imposed on the person if he proves that there was reasonable cause for the failure.

Deposit of Tax:
  • Tax collected at source shall be deposited within one week from the last day of the month in which collection is made.
  • To deposit TCS challan number 281 is to filled the same form is used for TDS also.
Issue of Tax collection certificate to Buyer.

  • The certificate shall be issued to the buyer on Form 27D with in one month from the end of the month during which amount is collected from the buyer.
  • Consolidated form 27D may be issued for 6 months for transaction upto 30 September by 31 October and upto march 31 by April 30th on request from the buyer.
Return
  • The seller who has collected and deposited the TCS has to file a quarterly return on form 27EQ by 15july,15september,15january,30April for respective quarters
Return on computer media(e TCS return) following person are required to file mandatory return on computer media known as e-TCS return.other person may filled their return on manual basic.
  • if collector is a company or
  • a person who's accounts are required to be audited u/s 44AB in immediately proceeding Financial year or
  • where any quarterly return filled by the person in the immediately proceeding year has collector entries of more than or equal to fifty.


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