Collection of Tax at Source, Advance Payment of Tax - Tax Administration, Income Tax Laws | Income Tax Laws - B Com PDF Download

STRUCTURE 

• Introduction
• Classification of Seller for TCS
• Classification of Buyer for TCS
• Goods and Transactions classified under TCS.
• Certificate of TCS
• TCS Exemptions
• Payment of TCS to the Government
• Electronic TCS (e-TCS)
• Filing of TCS Returns

1. INTRODUCTION

TCS is the Tax Collected at Source by the seller (collector) from the buyer/ lessee (collectee/ payee). The goods are as specified under section 206C of the Income Tax Act, 1961. 

If the purchase value of goods is X, the amount payable by the buyer is X+Y, where Y is the value of tax at source. The seller deposits Y (tax collected at source) at any designated branch of banks authorised to receive the payment.

The seller, lessor or licensor, is responsible for the collection of tax from the buyer, lessee or licensee. The tax is collected for sale of goods, on transactions, receipt of amount from the buyer in cash or issue of cheque, draft or any other mode, whichever is earlier.

2.    Classification of Seller for TCS

Under TCS, a seller is defined as any of the following: 

• Central Government
• State Government
• Any Local Authority
• Any Statutory Corporation or Authority
• Any Company
• Any Partnership Firm
• Any Co-operative Society
• Any individual/HUF whose total sales or gross receipts exceed the prescribed monetary limits as specified under section 44AB during the previous year

3.    Classification of Buyer for TCS

A buyer is classified as a person who obtains goods or the right to receive goods in any sale, auction, tender or any other mode. The following are not included: 

• Public Sector Companies
• Central Government
• State Government
• Embassy of High Commission, Consulate and other Trade Representation of a Foreign State
• Any Club, such as social clubs, sports clubs and the like

4.    Goods and Transactions classified under TCS

Goods and transactions classified under TCS are listed below: 

• Alcoholic liquor for human consumption including Indian Made Foreign Liquor (IMFL)
• Tendu leaves
• Timber obtained under a forest lease
• Timber obtained by any mode other than under a forest lease
• Any other forest produce not being Timber or Tendu
• Scrap (Scrap means waste and scrap from the manufacture or mechanical working of materials which is usable as such because of breakage, cutting up, wear and tear and other reasons)
• Licensing or leasing of Parking Lot, Toll Plaza
• Mining and quarrying

5.    Certificate of TCS

The certificate of collection of tax at source has to be submitted in Form No-27D by persons collecting tax at source within a week from the last day of the month in which the tax was collected.

If there is more than one certificate to be issued to a buyer for tax collected at source with respect to the period ending September 30 and March 31 in the financial year, then the person collecting the tax on request from the buyer can issue a consolidated certificate within one month from the end of such period.

If an issued TCS certificate is lost, the person collecting tax at source may issue a duplicate certificate on plain paper, with necessary details as contained in Form-27D. 

The Assessing Officer (AO), before giving credit for the tax collected at source on the basis of the duplicate certificate, has to get the payment certified and obtain an Indemnity Bond from the assessee.

6.    TCS Exemptions

TCS can be totally exempted or fixed at a lower rate under some circumstances.

Total Exemption: No TCS Collection

A declaration by the buyer in Form Number 27C (in duplicate) has to be made for total exemption. The declaration is if the goods listed are to be used for the purpose of manufacturing or processing and not trading. A copy of the declaration has to be given to the person collecting tax. 

The person collecting this declaration form has to submit the copy to the authorities concerned on or before the seventh day of the following month.

Lower Rate of TCS

The buyer (Collectee) can apply to the Assessing Officer (AO) for a lower rate, using Form No.13,  subject to the condition that the AO is convinced that the total income of the buyer (Collectee) justifies the lower rate. The AO may issue a certificate, specifying the rate of collection.

7.    Payment of TCS to the Government

The tax collected is to be paid to the Central Government within one week of the last day of the month in which the tax was collected. This payment is made in any branch of Reserve Bank of India (RBI), State Bank of India (SBI), or any other authorised bank. The payment is made accompanied by income tax challan 281. If the tax is collected on behalf of the Government, then the amount can be paid without the income tax challan.

8.    Electronic TCS (e-TCS)

e-TCS is the filing of TCS returns using electronic media. It is mandatory for corporate and government collectors to furnish TCS returns in electronic form, from financial year 2004-2005. Collectors (other than government and corporates) may file TCS returns in electronic or physical form. 

NSDL collects the e-TCS returns from the Collectors on behalf of the Income Tax Department.

TCS returns on computer media for e-TCS

TCS returns filed using computers should be in TCS specific form formats and must contain all the information, details and particulars specified in such forms.

Computer media specifications are as follows (any of these):

• CD ROM of capacity 650 MB or more

• 4mm 2GB/4GB (90M/120M) DAT Cartridge

• 3.5 Inches, 1.44 MB floppy diskette.

The returns must be accompanied by Form No.27B and verified.

9.    Filing of TCS Returns

TCS returns are to be filed quarterly, in addition to annual returns.

• The quarterly returns are to be filed in Form Number 27EQ on or before  July 15, October 15 and January 15, respectively for the first three quarters of the financial year. For the last quarter, the returns are to be filed on or before April 30.  

• Annual returns are to be filed in Form Number 27E on or before June 30 of the following financial year

Advance Payment of Tax

According to Section 208 of Income tax Act, 1961, every person whose estimated tax liability for the FY exceeds Rs.10,000 has to pay tax in advance.

Section 208 of Income Tax Act

According to Section 208 of the Income Tax Act:

1. Every assessee shall be liable to pay advance income-tax during any financial year in respect of his total income of the financial year, if the amount of advance income-tax payable exceeds ten thousand rupees.

2. The amount of advance income-tax payable by an assessee in the financial year shall be computed in the following manner, namely :

   1. the assessee shall first estimate his total income and calculate income-tax thereon  at the rates in force in the financial year

   2. the income-tax so calculated shall be reduced by;

      1. the amount of income-tax which would be deductible or collectible at source during the financial year from any income which is taken into account in estimating the total income.

      2. the amount of credit under section 207, allowed to be set-off in the financial year AND

      3.  the balance amount of income-tax shall be the advance income-tax payable.
         
         

3. The advance income-tax, in case of any person other than a company, shall be payable in three instalments during the financial year on or before the dates  as specified.

Who should pay advance tax?

Salaried persons are not required to pay advance tax, as the employer usually deducts tax at source (TDS). However, if an employee has any other income other than salary income for which tax has not been deducted at source and the tax liability exceeds more than Rs.10000, then advance tax must be paid.

Professionals (self-employed), businessmen and corporates will have to pay taxes in advance as they typically have taxable income that exceeds the advance tax payment threshold.

When to pay advance tax?

The advance tax is to be paid in the following  three instalments on the following dates:

For Non-Corporate Assessee:

• On or before 15 September – not less than 30% of tax payable for the year.

• On or before 15 December – not less than 60% of tax payable for the year.

• On or before 15 March – not less than 100% of tax payable for the year.

For Corporate Assessee: 

On or before 15 June – not less than 15% of tax payable for the year.
On or before 15 September – not less than 45% of tax payable for the year.
On or before 15 December – not less than 75% of tax payable for the year.
On or before 15 March – not less than 100% of tax payable for the year.

How to pay advance tax?

You can pay advance tax using the tax payment challan at the bank branches empanelled with the Income Tax (I-T) department. Advance tax can be deposited with State Bank of India, ICICI Bank, HDFC Bank, Indian Overseas Bank, Indian Bank, and other authorised banks. There are over 926 branches in India that can accept advance tax payments. Now, advance tax can also be paid through the NDSL website.

Advance tax exemption

According to Section 207 of the Act, a resident senior citizen (an individual of age 60 years or more) who does not have any income from business or profession is not liable to pay advance tax. For instance, a senior citizen may have various sources of income such as rental income, pension, interest from bank deposits, or dividends. Senior citizens do not have to pay advance tax, as these sources of income do not fall under the income tax head of “income from business or profession”.  Also, this exemption is provided irrespective of the amount of income that a senior citizen earns from a source other than business or profession.