Collection of Tax at Source | Income Tax Laws - B Com PDF Download

 Page 1


Collection of T ax at Source 
 
The Indian Income T ax Act has provisions for tax collection at source or TCS. According to these 
provisions, certain persons are required to collect a speci?ed percentage of tax from their buyers 
on speci?ed transactions. In this article, we will discuss the different transactions on which TCS 
has to be collected. 
 
What is T ax Collected at Source (TCS)? 
? T ax collected at source (TCS) is the tax payable by the seller which he collected from the 
buyer on sale. 
?  It should be deposited with the tax authorities within the applicable due dates.  
? Section 206C of the Income-tax Act governs the goods on which the seller has to collect 
tax from the buyers. Such persons must have the T ax Collection Account Number (TAN) to 
be able to collect TCS. 
? It is to be noted that the seller is responsible only for collecting the tax and depositing it to 
the government. He is not responsible for paying the TCS money out of his pocket.   
Example:  
? Mr. A sold goods worth Rs.100 to Mr. B on which TCS is applicable.  
? Mr. A will collect the TCS at 1% from the buyer 
?  So, he will be collecting Rs.101 from Mr. B (Rs.100 + 1%of 100) 
? The money collected as TCS should be deposited to the government within the speci?ed 
due dates. 
? Mr. A is responsible only for collecting the tax and depositing it to the government. 
? The TCS rates for different goods is speci?ed below: 
Page 2


Collection of T ax at Source 
 
The Indian Income T ax Act has provisions for tax collection at source or TCS. According to these 
provisions, certain persons are required to collect a speci?ed percentage of tax from their buyers 
on speci?ed transactions. In this article, we will discuss the different transactions on which TCS 
has to be collected. 
 
What is T ax Collected at Source (TCS)? 
? T ax collected at source (TCS) is the tax payable by the seller which he collected from the 
buyer on sale. 
?  It should be deposited with the tax authorities within the applicable due dates.  
? Section 206C of the Income-tax Act governs the goods on which the seller has to collect 
tax from the buyers. Such persons must have the T ax Collection Account Number (TAN) to 
be able to collect TCS. 
? It is to be noted that the seller is responsible only for collecting the tax and depositing it to 
the government. He is not responsible for paying the TCS money out of his pocket.   
Example:  
? Mr. A sold goods worth Rs.100 to Mr. B on which TCS is applicable.  
? Mr. A will collect the TCS at 1% from the buyer 
?  So, he will be collecting Rs.101 from Mr. B (Rs.100 + 1%of 100) 
? The money collected as TCS should be deposited to the government within the speci?ed 
due dates. 
? Mr. A is responsible only for collecting the tax and depositing it to the government. 
? The TCS rates for different goods is speci?ed below: 
 
Who Can Collect TCS? 
 
TCS is collected on speci?c goods. The seller collects tax from the buyer in addition to the value of 
the goods/services. A buyer is a person who obtains speci?c goods in any sale or right to receive 
goods by tender, auction, etc. 
 
TDS and TCS - An Illustration 
Confused Between TDS and TCS? Let's get it sorted now through this illustration! 
 
Consider yourself as a customer who has made a purchase and needs to pay the bill amount to the 
seller. 
 
If TDS Needs to be Deducted 
 
The person who pays the bill (you) needs to deduct the TDS amount and pay only the rest of the 
amount to the seller. You are also responsible for remitting the TDS deducted to the government 
within the applicable due dates. 
 
If TCS Needs to be Collected 
 
Page 3


Collection of T ax at Source 
 
The Indian Income T ax Act has provisions for tax collection at source or TCS. According to these 
provisions, certain persons are required to collect a speci?ed percentage of tax from their buyers 
on speci?ed transactions. In this article, we will discuss the different transactions on which TCS 
has to be collected. 
 
What is T ax Collected at Source (TCS)? 
? T ax collected at source (TCS) is the tax payable by the seller which he collected from the 
buyer on sale. 
?  It should be deposited with the tax authorities within the applicable due dates.  
? Section 206C of the Income-tax Act governs the goods on which the seller has to collect 
tax from the buyers. Such persons must have the T ax Collection Account Number (TAN) to 
be able to collect TCS. 
? It is to be noted that the seller is responsible only for collecting the tax and depositing it to 
the government. He is not responsible for paying the TCS money out of his pocket.   
Example:  
? Mr. A sold goods worth Rs.100 to Mr. B on which TCS is applicable.  
? Mr. A will collect the TCS at 1% from the buyer 
?  So, he will be collecting Rs.101 from Mr. B (Rs.100 + 1%of 100) 
? The money collected as TCS should be deposited to the government within the speci?ed 
due dates. 
? Mr. A is responsible only for collecting the tax and depositing it to the government. 
? The TCS rates for different goods is speci?ed below: 
 
Who Can Collect TCS? 
 
TCS is collected on speci?c goods. The seller collects tax from the buyer in addition to the value of 
the goods/services. A buyer is a person who obtains speci?c goods in any sale or right to receive 
goods by tender, auction, etc. 
 
TDS and TCS - An Illustration 
Confused Between TDS and TCS? Let's get it sorted now through this illustration! 
 
Consider yourself as a customer who has made a purchase and needs to pay the bill amount to the 
seller. 
 
If TDS Needs to be Deducted 
 
The person who pays the bill (you) needs to deduct the TDS amount and pay only the rest of the 
amount to the seller. You are also responsible for remitting the TDS deducted to the government 
within the applicable due dates. 
 
If TCS Needs to be Collected 
 
? The seller - the person who receives the money, needs to collect the TCS amount plus the 
bill amount. The seller is responsible for remitting the TCS amount to the government 
within the applicable due dates.  
? Broadly speaking, the whole process of collecting TCS and remitting it to the government 
can be compared to the system of the seller collecting GST from the customer and paying it 
to the government. 
 
When Should TCS be Collected? 
The seller must collect TCS at the earlier of the following two dates: 
? When the seller passes the entry in the books of accounts for credit sales. 
? When the seller receives the money from the buyer in any mode. (cash issue of a cheque or 
draft) 
In the case of the motor vehicle sale, the TCS is collected upon receipt of money from the buyer. 
 
TCS Rates for Speci?c Goods 
T axes are paid only when the goods are utilized for trading purposes, and not when utilized for 
manufacturing, processing or producing things. The tax payable is collected by the seller at the 
point of sale. The rate of TCS is different for goods speci?ed under different categories : 
 
Type of Goods or Transactions Rate 
Liquor of alcoholic nature, made for consumption by humans 1% 
Timber wood obtained under a forest leased 2.5% 
T endu leaves 5% 
Page 4


Collection of T ax at Source 
 
The Indian Income T ax Act has provisions for tax collection at source or TCS. According to these 
provisions, certain persons are required to collect a speci?ed percentage of tax from their buyers 
on speci?ed transactions. In this article, we will discuss the different transactions on which TCS 
has to be collected. 
 
What is T ax Collected at Source (TCS)? 
? T ax collected at source (TCS) is the tax payable by the seller which he collected from the 
buyer on sale. 
?  It should be deposited with the tax authorities within the applicable due dates.  
? Section 206C of the Income-tax Act governs the goods on which the seller has to collect 
tax from the buyers. Such persons must have the T ax Collection Account Number (TAN) to 
be able to collect TCS. 
? It is to be noted that the seller is responsible only for collecting the tax and depositing it to 
the government. He is not responsible for paying the TCS money out of his pocket.   
Example:  
? Mr. A sold goods worth Rs.100 to Mr. B on which TCS is applicable.  
? Mr. A will collect the TCS at 1% from the buyer 
?  So, he will be collecting Rs.101 from Mr. B (Rs.100 + 1%of 100) 
? The money collected as TCS should be deposited to the government within the speci?ed 
due dates. 
? Mr. A is responsible only for collecting the tax and depositing it to the government. 
? The TCS rates for different goods is speci?ed below: 
 
Who Can Collect TCS? 
 
TCS is collected on speci?c goods. The seller collects tax from the buyer in addition to the value of 
the goods/services. A buyer is a person who obtains speci?c goods in any sale or right to receive 
goods by tender, auction, etc. 
 
TDS and TCS - An Illustration 
Confused Between TDS and TCS? Let's get it sorted now through this illustration! 
 
Consider yourself as a customer who has made a purchase and needs to pay the bill amount to the 
seller. 
 
If TDS Needs to be Deducted 
 
The person who pays the bill (you) needs to deduct the TDS amount and pay only the rest of the 
amount to the seller. You are also responsible for remitting the TDS deducted to the government 
within the applicable due dates. 
 
If TCS Needs to be Collected 
 
? The seller - the person who receives the money, needs to collect the TCS amount plus the 
bill amount. The seller is responsible for remitting the TCS amount to the government 
within the applicable due dates.  
? Broadly speaking, the whole process of collecting TCS and remitting it to the government 
can be compared to the system of the seller collecting GST from the customer and paying it 
to the government. 
 
When Should TCS be Collected? 
The seller must collect TCS at the earlier of the following two dates: 
? When the seller passes the entry in the books of accounts for credit sales. 
? When the seller receives the money from the buyer in any mode. (cash issue of a cheque or 
draft) 
In the case of the motor vehicle sale, the TCS is collected upon receipt of money from the buyer. 
 
TCS Rates for Speci?c Goods 
T axes are paid only when the goods are utilized for trading purposes, and not when utilized for 
manufacturing, processing or producing things. The tax payable is collected by the seller at the 
point of sale. The rate of TCS is different for goods speci?ed under different categories : 
 
Type of Goods or Transactions Rate 
Liquor of alcoholic nature, made for consumption by humans 1% 
Timber wood obtained under a forest leased 2.5% 
T endu leaves 5% 
Timber wood by any mode other than forest-leased 2.5% 
Forest produce other than T endu leaves and timber 2.5% 
Scrap 1% 
Minerals being lignite, coal and iron ore 1% 
Purchase of Motor vehicle exceeding Rs.10 lakh 1% 
Parking lot, T oll Plaza and Mining and Quarrying 
 
2% 
 
When will the Higher TCS Rate Apply? 
Note that as per Section 206 CCA, tax at a higher rate (other than rates in the above table) will be 
collected from the buyer if such buyer has- 
? Not ?led ITR for the last two ?nancial years before the ?nancial year in which TCS 
had to be collected (and) 
? The time limit to ?le ITR has expired (and) 
Page 5


Collection of T ax at Source 
 
The Indian Income T ax Act has provisions for tax collection at source or TCS. According to these 
provisions, certain persons are required to collect a speci?ed percentage of tax from their buyers 
on speci?ed transactions. In this article, we will discuss the different transactions on which TCS 
has to be collected. 
 
What is T ax Collected at Source (TCS)? 
? T ax collected at source (TCS) is the tax payable by the seller which he collected from the 
buyer on sale. 
?  It should be deposited with the tax authorities within the applicable due dates.  
? Section 206C of the Income-tax Act governs the goods on which the seller has to collect 
tax from the buyers. Such persons must have the T ax Collection Account Number (TAN) to 
be able to collect TCS. 
? It is to be noted that the seller is responsible only for collecting the tax and depositing it to 
the government. He is not responsible for paying the TCS money out of his pocket.   
Example:  
? Mr. A sold goods worth Rs.100 to Mr. B on which TCS is applicable.  
? Mr. A will collect the TCS at 1% from the buyer 
?  So, he will be collecting Rs.101 from Mr. B (Rs.100 + 1%of 100) 
? The money collected as TCS should be deposited to the government within the speci?ed 
due dates. 
? Mr. A is responsible only for collecting the tax and depositing it to the government. 
? The TCS rates for different goods is speci?ed below: 
 
Who Can Collect TCS? 
 
TCS is collected on speci?c goods. The seller collects tax from the buyer in addition to the value of 
the goods/services. A buyer is a person who obtains speci?c goods in any sale or right to receive 
goods by tender, auction, etc. 
 
TDS and TCS - An Illustration 
Confused Between TDS and TCS? Let's get it sorted now through this illustration! 
 
Consider yourself as a customer who has made a purchase and needs to pay the bill amount to the 
seller. 
 
If TDS Needs to be Deducted 
 
The person who pays the bill (you) needs to deduct the TDS amount and pay only the rest of the 
amount to the seller. You are also responsible for remitting the TDS deducted to the government 
within the applicable due dates. 
 
If TCS Needs to be Collected 
 
? The seller - the person who receives the money, needs to collect the TCS amount plus the 
bill amount. The seller is responsible for remitting the TCS amount to the government 
within the applicable due dates.  
? Broadly speaking, the whole process of collecting TCS and remitting it to the government 
can be compared to the system of the seller collecting GST from the customer and paying it 
to the government. 
 
When Should TCS be Collected? 
The seller must collect TCS at the earlier of the following two dates: 
? When the seller passes the entry in the books of accounts for credit sales. 
? When the seller receives the money from the buyer in any mode. (cash issue of a cheque or 
draft) 
In the case of the motor vehicle sale, the TCS is collected upon receipt of money from the buyer. 
 
TCS Rates for Speci?c Goods 
T axes are paid only when the goods are utilized for trading purposes, and not when utilized for 
manufacturing, processing or producing things. The tax payable is collected by the seller at the 
point of sale. The rate of TCS is different for goods speci?ed under different categories : 
 
Type of Goods or Transactions Rate 
Liquor of alcoholic nature, made for consumption by humans 1% 
Timber wood obtained under a forest leased 2.5% 
T endu leaves 5% 
Timber wood by any mode other than forest-leased 2.5% 
Forest produce other than T endu leaves and timber 2.5% 
Scrap 1% 
Minerals being lignite, coal and iron ore 1% 
Purchase of Motor vehicle exceeding Rs.10 lakh 1% 
Parking lot, T oll Plaza and Mining and Quarrying 
 
2% 
 
When will the Higher TCS Rate Apply? 
Note that as per Section 206 CCA, tax at a higher rate (other than rates in the above table) will be 
collected from the buyer if such buyer has- 
? Not ?led ITR for the last two ?nancial years before the ?nancial year in which TCS 
had to be collected (and) 
? The time limit to ?le ITR has expired (and) 
? The total of TCS and TDS was more than Rs.50,000 in each of these two ?nancial 
years. 
Such a higher TCS rate will be the highest of the following two rates- 
? Two times the TCS rate mentioned in the Income T ax Act ( in the above table) 
? 5% TCS 
Note: This section has been omitted w.e.f. 1 April 2025. 
Example of TCS Calculation 
If a buyer purchases a car from a showroom valued at Rs.11 lakh, then the showroom must collect 
and deposit Rs. 11,000 as the TCS. So, the total amount to be collected from the buyer is 
Rs.11,11,000 (Rs. 11,00,000 + Rs. 11,000). 
TCS Payments & Returns 
? All sums collected by an of?ce of the Government should be deposited on the same 
day of collection. 
? The seller has to deposit the TCS amount through the e-?ling portal within 7 days 
from the last day of the month in which the tax was collected (monthly). 
? If the tax collector responsible for collecting the tax and depositing the same with 
the government does not collect the tax or, after collecting, doesn’t pay it to the 
government as per the above due dates, then he will be liable to pay interest of 1% 
per month or part of the month.