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Tax Collected at Source

TCS is an extra sum collected as tax from the customer at the time of sale by a seller of designated products and sent to the government account. Join us for compliance & TCS retuns. 


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Tax collected at source (TCS) - Checklist, Features, Steps Involved!

The Indian Income Tax Act includes provisions for tax collection at source, sometimes known as TCS. Certain individuals are obligated by these regulations to collect a specific proportion of tax from their buyers on unusual transactions. The majority of these transactions are of a commercial or trading character. It has no effect on the average person. 

Tax Collected at Source (TCS) under GST is the tax collected from suppliers by an e-commerce operator. This tax is deducted from the operator's payment for goods/services provided through his online platform. TCS will be assessed as a percentage of net taxable supply.


What is TCS (Tax Collected at Source)?

The tax collected at source (TCS) is the tax collected by the seller from the customer at the time of sale and deposited with the tax authorities. The items on which the seller must collect tax from the customers are governed by Section 206C of the Income-tax Act. To collect TCS, such individuals must obtain a Tax Collection Account Number.

When will a higher TCS rate be applicable?

It should be noted that, according to Section 206CCA, a higher rate of tax (different than the rates in the above table) would be collected from the buyer if such buyer has-

  • Not submitted ITR for the two fiscal years before the relevant fiscal year in which TCS was required to be collected.

  • The deadline for filing ITR has passed.

  • TCS and TDS totaled more than Rs.50,000 in each of these two fiscal years.

This greater TCS rate will be the higher of the two rates-

  • Two times the TCS rate specified in the Income Tax Act (as seen in the table above).

  • 5% TCS rate will be the highest 

In the particular instances specified in Section 206C(IG), 5% TCS applies when an authorised dealer arranges a transfer out of India of Rs.7 lakhs or more in a fiscal year from a buyer of foreign currency remitting under the Liberalized transfer Scheme (LRS) that is not part of an overseas trip program package. If Aadhaar or PAN are not provided, TCS is 10%. TCS is collected when the buyer's account is debited or when money is received.

Classification of Seller for TCS

Some individuals or organizations have been designated as sellers for tax collection at the source. Aside from the sellers listed here, no other seller of products can collect tax at source from purchasers.

  • Central Administration

  • State Administration

  • Local Government

  • Authority or Statutory Corporation

  • The company incorporated under the Companies Act

  • Partnership corporations

  • The Cooperative Society

  • Any individual or HUF who is subject to an audit of accounts under the Income-tax Act for a particular financial year.

Buyer Classification for TCS

A buyer is a person who receives items of a certain type by any sale or right to receive such things via auction, tender, or any other method. However, the buyers listed below are free from paying tax at the point of sale. In other words, TCS does not have to be obtained from the individuals listed below.

  • Companies in the public sector

  • Central Government State Government

  • Embassy of High Commission

  • Consulate and other Foreign Trade Representation

  • Clubs such as sports clubs and social clubs

  • When a resident buyer uses such acquisition to manufacture, process, or produce products or things, or to generate electricity (rather than for trade), and provides this statement in writing in duplicate.

When should TCS be collected?

The vendor must collect TCS on the sooner of the two dates listed below:

  • When debiting the buyer's money payable to their account in the books of accounts.

  • Upon receipt of such funds from the buyer in any form, including cash, the issuance of a check or draft.

  • The TCS is collected upon receipt of money or consideration for the motor vehicle from the buyer in the case of a motor vehicle transaction.

TCS Payments and Refunds

  • All payments collected by a government office must be deposited on the same day they are collected.

  • Within 7 days of the final day of the month in which the tax was collected (monthly), the seller deposits the TCS amount in Challan 281.​​

  • If the tax collector in charge of collecting the tax and depositing it with the government fails to collect the tax or fails to deposit it with the government by the above-mentioned due dates, he will be liable to pay interest at the rate of 1% each month or part of a month. 

  • Every tax collector is required to file a quarterly TCS return, i.e. Form 27EQ, for the tax collected in a given quarter. The interest on the late payment of TCS to the government should be paid before the return is filed.

The TCS Certificate

  • When a tax collector submits his quarterly TCS return, Form 27EQ, he must furnish the purchaser of the goods with a TCS certificate.

  • The certificate issued for TCS returns is Form 27D.  ​​

  • This certificate must be granted within 15 days after the submission of TCS quarterly returns.

Exemptions from TCS

Tax collection at the source is prohibited in the following circumstances:

  • When the eligible commodities are consumed personally​​

  • The purchaser purchases the items for the purpose of manufacturing, processing, or producing rather than exchanging those commodities.

GST TCS provision for e-commerce sales

  • Any dealer or merchant selling items on an e-commerce platform will get payment from the platform after subtracting a 1% tax under the IGST Act. (0.5% CGST and 0.5% SGST)​​

  • The tax would have to be paid to the government by the tenth of the following month.

  • All dealers/traders are obliged to register for GST on a mandatory basis.

  • These provisions go into effect on October 1, 2018. Example: Mr Raj (seller) is a businessman who sells garments on Flipkart (an e-commerce platform). He receives a commission-free order for Rs.10,000. Flipkart would thus deduct tax in the amount of Rs.100 (1% of Rs.10,000). 

Completion of Form 24G

In the instance of a government office, where tax has been paid to the credit of the Central Government without the submission of a challan linked with the deposit of the tax in a bank, the following requirements must be followed, and Form 24G must be submitted

Rules governing the deposit of TDS without a challan (changes to Rule 30)

  • If TDS was not deposited via a challan, the person to whom TDS was reported for depositing to the government must send a statement in Form 24G to the agency authorized by the Principal Director of Income Tax (Systems). [Rule 30(4)]

  • Form 24G must be submitted within 15 days after the end of the applicable month. The form for the month of March must be filed by 30 April 2019.

  • Form 24G must be filed (a) electronically with a digital signature (b) electronically with verification in Form 27A (c) or electronically verified as stipulated.

  • A person referred to in bullet 1 must provide the Book Identification number created to each deductor for whom the amount deducted has been deposited.

  • The method for submitting and verifying statement Form 24G should be specified by the Principal Director General of Income Tax (Systems).  

Rules governing the deposit of TCS under Section 206C without a challan (modifications to Rule 37CA)

  • If TCS was deposited without a challan, the person to whom the collector reported the TCS for depositing with the government would send Form 24G to the agency authorized by the Principal Director of Income Tax (Systems).

  • Form 24G must be submitted within 15 days after the end of the month in question.

  • If Form 24G is for the month of March, it must be submitted on or before April 30th.

  • Form 24G is required.

  • A person referred to in bullet 1 must provide the Book Identification number created to each deductor for whom the amount deducted has been deposited.

  • The method for submitting and verifying statement Form 24G should be specified by the Principal Director General of Income Tax (Systems).


Documents Required for Tax collection at  Source


FAQs on TCS Services online 

Question: Can I look up my TCS on Form 26AS?
Answer: Yes, Form 26AS shows information on Tax Collected at Source (TCS) by a seller of specified commodities when such things were supplied to you. It will show the seller's information, as well as the TCS amount and the transaction for which tax was collected at the source. 

Question: Is tax collected at the point of collection refundable?

Answer: Yes, the TCS collected on a buyer's PAN, like the TCS, is adjustable.

Question: Why was tax collection at source implemented?

Answer: These regulations were created in response to the tax department's problems in assessing the income of assesses who enter into contracts for the sale of liquor, scrap, forest goods, and so on. 

Question: What is the purpose of the tax collected?

Answer: The source tax is the same as the advance income tax revenue collected by the tax department for a fiscal year. It is utilized for social upliftment, education, and national infrastructure development, among other things.

Question:  Is TCS applicable to all international remittances?

Answer: No. Only remittances covered by the LRS are subject to TCS. These are covered in depth in the explanations' Part B answer to Q (5).

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