Thursday, January 28, 2010

TAX COLLECTION AT SOURCE(TCS) PROVISIONS & TCS RATES


on Thursday, January 28, 2010

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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  1. what if the buyer does not have pan...will 20% rate be applicable alike TDS

    ReplyDelete
  2. how indivisual an employee can know tax collected at source by employer is

    properly deposited in income tax department.how to check please advice. my name is mayoor kumar shah, pan no.AEFPS4162N,MY tax
    deducted at source is rs. 18470/-.please let me know whether the
    amount is properly deposited in income tax department./f.y. 2011-2012
    email------- [email protected],in
    date 26 -7-2012

    ReplyDelete
    Replies
    1. you have to check form 26as online which can be checked in three ways .All has been explained in detail

      http://www.simpletaxindia.net/2012/03/three-ways-to-check-tax-deducted.html

      Delete
    2. I HAVE CHECKED AND FOUND THAT IN PLACE OF RS. 18470/-DEDUCED

      26AS IS SHOWING RS.10000/- WHAT SHOULD BE DONE? CONTACTED DEDUCTOR/EMPLOYER SAYING WE HAVE DEPOSITED RS18470/- AND ISSUED

      A-16 WITH CHALAN NO.AND DATE TO YOU NOW CONTACT INCOME TAX

      DEPARTMENT WHY IT IS NOT SHOWING. PLEASE ADVICE.

      Delete
    3. read this article ,if any doubt left then come up with details and ask query again ,

      http://www.simpletaxindia.net/2012/04/demand-notice-mis-matching-of-tds-in.html

      Delete
  3. How to generate form 27D (TCS Certificate online). Please guide.

    ReplyDelete
    Replies
    1. TCS form are not provided by Income tax department(TIN_NSDL) unlike form 16A . Further these forms are not required to be issued after downloaded the same from tin -nsdl. So create this form manually

      Delete
  4. I am a trader in coal and my firm is a proprietorship firm. I purchase coal from Mahanadi Coalfields Limited (MCL), a subsidiary of Coal India Limited in e-auction. They have started charging TCS @ 1% w.e.f. 01/07/2012. I am selling coal to the industries, Traders as well as petty consumers of coal.
    Are provisions of TCS applicable on me ?
    Do I have to collect TCS / Form 27C from my buyers ? and deposit the same with Income tax authorities ?
    If so at what rate TCS is to be collected by me.
    email - [email protected]

    ReplyDelete
  5. whether TCS in case of scrap is deducted on amount inclucive or exclucive of excise duty and vat????

    ReplyDelete
  6. regarding TCS on coal we are coal traders company we are selling coals to industries as well as traders if we are selling coal to industries they consume coal to own industries than as per rule tcs not applicable if they issue 27 c form what i want to know when we collect this 27 c form this form is one time for one company or with every bill or month wise or quarterly or sixmonthly or annualy please any one explain us we are confused

    ReplyDelete
  7. Is TCS is applicable in "Club" which is Ltd. Company on purchase of Liquor???

    ReplyDelete
    Replies
    1. no ,it is only first time tax ,so not applicable on next stage

      Delete
  8. Whether it is compulsary to show TCS amount on Scrap sale Invoice ???

    ReplyDelete
  9. Am i liable to collect TCS when I am selling sawn timber(timber logs cut into sheets or pillars or crates of regular size). The person from whom i am buying timber is not copllecting TCS from me.

    ReplyDelete
  10. if i am a buyer. i am purchasing the scrap for manufacturing process. then how much is the validity of 27c form which i submitted to seller. should i submit the form 27c against every transaction.

    ReplyDelete
  11. if i am a buyer. i am purchasing the scrap for manufacturing process. then how much is the validity of 27c form which i submitted to seller. should i submit the form 27c against every transaction.

    ReplyDelete