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.

Time Limits for Issuing Notices Under the Income Tax Act

The Income Tax Act prescribes specific time limits for issuing different types of notices. Below is a summary of key provisions and their respective deadlines.

1. Notice for Scrutiny Assessment – Section 143(2)

📌 Purpose: Issued when a return is selected for detailed scrutiny.
📅 Time Limit: Within 3 months from the end of the financial year in which the return is filed.
🔹 Example: If a return for AY 2023-24 was filed on July 15, 2023, notice under Section 143(2) can be issued until June 30, 2024.

2. Notice for Income Escaping Assessment – Section 148

📌 Purpose: Issued when the Assessing Officer believes income has escaped assessment.
📅 Time Limits:

• Within 3 years from the end of the relevant assessment year (for income escaping ₹50 lakh or less).
• Within 10 years from the end of the relevant assessment year (if escaped income is more than ₹50 lakh).

🔹 Example: If income for AY 2019-20 escaped assessment, notice can be issued up to March 31, 2023 (for income ≤ ₹50 lakh) or March 31, 2030 (for income > ₹50 lakh).

3. Notice for Defective Return – Section 139(9)

📌 Purpose: Issued when a return is found defective due to missing details or incorrect disclosures.
📅 Time Limit: No fixed deadline, but usually issued within 6 months from return filing.
🔹 The taxpayer must rectify the defect within 15 days (or as allowed by the AO).

4. Notice for Best Judgment Assessment – Section 144

📌 Purpose: Issued when a taxpayer fails to file a return or does not respond to notices.
📅 Time Limit: Within 3 months before the end of the assessment year.

5. Notice for Inquiry Before Assessment – Section 142(1)

📌 Purpose: Issued when additional documents or explanations are required before completing an assessment.
📅 Time Limit: No prescribed limit, but usually issued before assessment completion.

6. Notice for Penalty – Section 274

📌 Purpose: Issued before imposing a penalty for non-compliance or misreporting of income.
📅 Time Limit: Generally within 6 months from the end of the financial year in which the assessment order is passed.

Final Thoughts

Timely compliance with notices is crucial to avoid penalties and interest. If you receive an Income Tax notice, verify its validity and time limits before responding. 🚀

When Can a Notice Under Section 143(1) NOT Be Issued?

A notice under Section 143(1) of the Income Tax Act is an intimation issued by the Income Tax Department after processing the Income Tax Return (ITR). However, in certain cases, this notice cannot be issued. These situations include:

📌 1. If the Return is Not Filed

• A Section 143(1) notice is generated only if a taxpayer has filed an ITR.
• If the return is not filed, a notice under Section 142(1) or 148 (for non-filing or reassessment) may be issued instead.

📌 2. If a Scrutiny Assessment Has Already Been Initiated (Section 143(2))

• If a detailed scrutiny notice (Section 143(2)) has already been issued, then an intimation under Section 143(1) cannot be issued later.
• The scrutiny process involves a deeper examination of financial records beyond the automated processing of 143(1).

📌 3. If More Than 9 Months Have Passed from the End of the Financial Year

• As per the Income Tax Act, a Section 143(1) notice must be issued within 9 months from the end of the financial year in which the ITR was filed.
• If this time limit expires, the notice cannot be issued.

📌 4. If No Adjustments Are Required in the Return

• The notice under Section 143(1) is issued only when:
  • There is a mismatch in the return filed and tax computation by the department.
  • There are arithmetical errors, incorrect claims, or tax credit mismatches.
• If no such adjustments are required, no notice is issued, and the return is processed smoothly.

📌 5. If the Return is Already Processed & Refund Issued

• Once the return is processed and a refund (if applicable) is issued, a Section 143(1) notice will not be sent again unless there is an error detected later.

📌 6. If the Return is Invalid or Defective (Section 139(9))

• If the return is declared defective or invalid under Section 139(9) and is not corrected within the given time, a Section 143(1) notice cannot be issued.

📢 Final Thoughts

A Section 143(1) intimation is an automated processing summary, but it has limitations. If you receive a scrutiny notice (143(2)), missed the time limit, or have not filed a return, then a 143(1) notice cannot be issued. Always verify your tax filings to avoid unnecessary notices. 🚀

Read:What are the time limits of issuing of Notices under Income Tax Act?

Self-Assessment Under Income Tax Act – Section 140A

Self-assessment is the process where a taxpayer calculates and pays their own tax liability before filing the Income Tax Return (ITR). It ensures that all due taxes are paid before submission of the return.

📌 Key Aspects of Self-Assessment Tax

1️⃣ Applicable Section

• Self-assessment tax is governed by Section 140A of the Income Tax Act, 1961.

2️⃣ Who Needs to Pay It?

• If, after considering TDS, Advance Tax, and tax credits, there is any outstanding tax liability, the taxpayer must pay it as self-assessment tax before filing the ITR.

3️⃣ How to Calculate Self-Assessment Tax?

• Total Tax Liability (as per taxable income)
• Less: TDS Deducted
• Less: Advance Tax Paid
• Add: Interest under Sections 234A, 234B, 234C (if applicable)
• Balance Amount = Self-Assessment Tax Payable

4️⃣ Time of Payment

• Self-assessment tax must be paid before filing the ITR.
• If tax remains unpaid, the ITR will not be processed.

5️⃣ How to Pay Self-Assessment Tax?

• Pay online through Challan ITNS 280 at the Income Tax e-filing portal.
• Banks also accept payments for self-assessment tax.

6️⃣ Interest and Penalty

• If self-assessment tax is not paid on time, interest may be charged under Section 234A, 234B, and 234C.
• Late filing of the ITR can also lead to penalty under Section 234F.

7️⃣ Acknowledgment

• After payment, a challan receipt is generated, which should be mentioned in the ITR while filing.

📢 Final Thoughts

Self-assessment ensures that a taxpayer clears any pending tax before filing returns. Timely payment avoids interest and penalties, ensuring a smooth tax filing process. 🚀

Read:What are the time limits of issuing of Notices under Income Tax Act?