Tax Collected at Source (TCS) and Its Applicability

What is TCS?

Tax Collected at Source (TCS) is a tax that a seller collects from the buyer at the time of sale of specified goods or services. The seller is required to collect TCS at a prescribed rate and deposit it with the government.

Where is TCS Applicable?

TCS is applicable under Section 206C of the Income Tax Act, 1961 on the sale of certain specified goods and services. Some key transactions where TCS is levied include:

1. Sale of Specified Goods:

   • Alcoholic liquor for human consumption
   • Tendu leaves
   • Timber and other forest produce
   • Scrap
   • Minerals like coal, lignite, iron ore

2. Sale of Motor Vehicles:

   • If the value of the car exceeds ₹10 lakh, the seller must collect TCS at 1% from the buyer.

3. Foreign Remittances under LRS:

   • 5% TCS on remittances above ₹7 lakh under the Liberalized Remittance Scheme (LRS).
   • 20% TCS on foreign tour packages without PAN/Aadhaar.

4. Sale of Goods (Section 206C(1H)):

   • If the seller’s total turnover exceeds ₹10 crore in the previous financial year, then TCS at 0.1% is applicable if a buyer purchases goods worth more than ₹50 lakh.

5. E-Commerce Transactions (Section 206C(1G)):

   • E-commerce operators must collect 1% TCS on transactions made through their platform.

Key Points to Remember:

✅ TCS is collected by the seller and deposited with the government.
✅ The buyer can claim a credit of TCS while filing their Income Tax Return (ITR).
✅ TCS must be deposited by the seller before the 7th of the next month.
✅ Exemptions: TCS is not applicable if the buyer is a government entity, a recognized buyer, or purchases for manufacturing and resale purposes.

Read:Who is required to pay TCS?

Yes, when purchasing a flat from an individual or entity (other than under a development agreement), you may be required to deduct TDS under Section 194IA of the Income Tax Act if the transaction meets certain conditions.

TDS on Purchase of Property: Key Provisions

1. Threshold Limit:

   • If the sale consideration of the property is ₹50 lakh or more, TDS is applicable.
   • If the amount is below ₹50 lakh, no TDS deduction is required.

2. TDS Rate:

   • The buyer must deduct 1% TDS on the total transaction value if the seller is a resident Indian.
   • If the seller is a Non-Resident Indian (NRI), then TDS under Section 195 applies at a higher rate (generally 20% plus surcharge and cess, depending on the capital gain).

3. When to Deduct TDS:

   • TDS should be deducted at the time of payment to the seller (whether full payment or installment).

4. Deposit of TDS:

   • The deducted TDS should be deposited with the government using Form 26QB within 30 days from the end of the month in which TDS is deducted.
   • The buyer must issue a TDS certificate (Form 16B) to the seller after payment.

TDS on Property Purchase from an NRI

• If you are buying a property from an NRI, TDS is deducted under Section 195 instead of 194IA.
• The TDS rate varies based on the nature of the capital gains (long-term or short-term) and is usually 20% (plus surcharge and cess) on long-term gains.

Important Points to Note

✅ TDS is deducted by the buyer, not the seller.
✅ TDS applies on the entire sale consideration, not just the amount exceeding ₹50 lakh.
✅ Ensure to collect the seller’s PAN before deducting TDS to avoid higher tax deduction (20% in case of no PAN).
✅ If the seller applies for a lower TDS certificate under Section 197, TDS may be deducted at a lower rate.

Yes, there are certain ways to avoid or minimize the penalty imposed for failure to furnish a TDS return under the Income Tax Act. The penalties are primarily covered under Sections 234E and 271H of the Act.

1. Understanding the Penalty for Late Filing of TDS Return

• Late Fee under Section 234E:

  • A fine of ₹200 per day is levied until the TDS return is filed.
  • The total penalty cannot exceed the amount of TDS deducted.

• Penalty under Section 271H:

  • A minimum penalty of ₹10,000 and a maximum of ₹1,00,000 may be imposed for failure to file the return within one year.
  • This penalty is in addition to the late fee under Section 234E.

2. Ways to Avoid or Reduce the Penalty

✅ File the TDS Return at the Earliest

• If you have missed the deadline, file the TDS return as soon as possible to minimize the late filing fee under Section 234E.

✅ Request for Waiver of Penalty under Section 271H

• Under certain circumstances, the Assessing Officer (AO) may waive the penalty under Section 271H if:
  • TDS is deposited to the government account.
  • Late filing fees under Section 234E are paid.
  • TDS return is filed before the expiry of one year from the due date.

✅ File an Appeal to the Commissioner of Income Tax (CIT) (Appeals)

• If a penalty is levied, you can challenge the order before the CIT(A) by providing a reasonable cause for delay (e.g., technical issues, natural calamities, unavoidable business disruptions).

✅ Apply for Condonation of Delay

• In some genuine cases, the Income Tax Department may consider a condonation request if the delay was beyond your control.

✅ Ensure Correct Filing of Returns to Avoid Additional Penalties

• Incorrect filing of TDS returns may increase penalties. Always verify:
  • PAN details of deductees.
  • TDS amount credited.
  • Quarterly return deadlines (31st July, 31st October, 31st January, and 31st May).

Final Advice

If you have missed filing a TDS return, do not delay further. File it immediately and pay the late fees to minimize the financial burden. If there is a reasonable cause for the delay, you may approach the IT department for penalty relief under Section 271H.