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?