Tax Collected at Source | What is TCS?

Tax Collected at Source (TCS) was proposed under the Income Tax Act to collect a prescribed rate of tax from the buyer on specified goods and deposit the same with the Government. In this blog, we will discuss what is TCS and what is the prescribed rate of TCS.

What is TCS (Tax Collected at Source)?

Tax Collected at Source is the amount collected by the seller of specified goods from the buyer at the time of sale, over and above the sale amount, and is remitted to the government account. TCS follows the principle of “COLLECT AS YOU EARN”.

Section 206 of the Income-Tax Act defines the list of goods on which TCS is applicable,

To understand the concept of TCS better, let us take an example of X Good that costs Rs.100. The tax collected on the source for X is Rs. 20 (Rs. 80 + Rs. 20) and the seller deposits this amount to a certain branch of a bank that is authorized to accept the payment. Here, the sellers are not liable to pay the amount of tax themselves and are only responsible to collect the tax from the customer at the point of sale.

When is TCS Collected?

TCS is collected by the seller of specified goods from the buyer in the given cases, whichever is earlier:

• At the time of debiting the amount payable by the buyer in the books of accounts.
• At the time of receipt of the amount from the buyer in any mode of payment.

What is the Rate of TCS?

Here is the list of TCS Rates applicable on specified goods,

Seller Classifications of TCS

Here is the list of classified sellers in TCS who must collect tax from the buyer,

• Central Government
• State Government
• Local Authority
• Statutory Corporation or Authority
• Company registered under the Companies Act
• Partnership firms
• Co-operative Society
• Any person or HUF covered under Section 44AB

Buyer Classifications of TCS

The buyers classified to pay TCS are mentioned below,

• Public sector companies
• Central Government
• State Government
• Embassy of High Commission
• Consulate and other Trade Representation of a Foreign Nation
• Clubs such as sports clubs and social clubs

TCS Due Dates for Financial Year 2023-24

Month	Quarter	Date of deposit	Date of filling TCS return
Apr-Jun	Q1	7th of every next month in which payment is made	15th July
July-Sept	Q2		15th Oct
Oct-Dec	Q3		15th Jan
Jan-Mar	Q4		15th  May

TCS Return Form 27EQ

Form 27EQ of TCS Return contains all the details of tax collected at source as per Section 206C of the Income Tax Act 1961. The Form 27EQ must be filed by the taxpayer in every quarter and shall be submitted to the government collectors and deductors.

TCS Certificate Form 27D

TCS Certificate Form 27D has to be provided to the buyer of goods when the quarterly TCS Return is filed in Form 27EQ. The Certificate Form 27D contains the following details,

• Name of the Seller and Buyer
• TAN of the seller i.e. who is filing the TCS return quarterly
• PAN of both seller and buyer
• Total tax collected by the seller
• Date of collection
• The rate of Tax applied

Form 27D TCS Certificate is to be issued within a period of 15 days from the date of filing the quarterly TCS Return in Form 27EQ.

What is TCS at a Lower Rate?

As per Form 13, the buyer can apply to an Assessing Officer for a lower rate of Tax Collection at Source if the buyer’s gross income is justifiable for a lower rate. The Assessing Officer (AO) shall issue a certificate for a lower rate of TCS which will be applicable till it is not canceled by the AO.

Who is Exempt from TCS?

TCS exemption can be applied through Form 27C by the buyers using the goods for the purpose of manufacturing, processing, or production of goods/article or thing. A duplicate of Form 27C shall be given by the buyer in the declaration to the seller and the seller shall deliver a copy of Form 27C to the Chief Commissioner/Commissioner of Income Tax.