Tax Collected at Source, TCS Rates in India

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Tax Collected at Source (TCS) is to be collected by the seller from the buyer at the time of sale of specified category of goods. The TCS Rate is different for each category of goods and the TCS so collected by the seller from the buyer is to be required to be deposited with the govt. The current TCS Rates in force have been enclosed herewith.

TCS Rates

Nature of Goods TCS Rate
Alcoholic liqour for human consumption 1%
Tendu Leaves 5%
Timber obtained under a Forest Lease 2.5%
Timber obtained by any mode other than Forest Lease 2.5%
Any other Forest produce not being forest timber or tendu leaves 2%
Scrap 1%
Parking Lot, Toll Plaza, Mining and Quarrying 2%
Minerals being Coal or Lignite or Iron ore (applicable from 1st July 2012) 1%
Bullion if consideration exceeds Rs. 2 Lakhs or jewellery, if consideration exceeds Rs. 5 Lakhs (and any amount is received in cash)  (applicable from 1st July 2012) 1%

The concept of TCS can be explained with the help of an example. For example: Mr X buys from Mr. Y scrap for Rs. 1000. So Mr. X would be liable to pay Rs. 1010 to Mr Y (1000 for Scrap and 1% of Rs. 1000 i.e. Rs. 10 as TCS). This TCS so collected by Mr. Y would be required to be deposited with the Govt. by Mr Y.

Credit would be available to the buyer for the TCS so collected by the seller from the buyer. This TCS can be claimed as a credit by the buyer at the time of payment of taxes computed as per the income tax slab rates of the buyer. The Credit so claimed by the buyer is also required to be disclosed in the income tax return.

Exception to applicability of TCS Rates

The requirement of tax collection at source shall not apply in case the buyer (provided he is resident in India), furnishes a declaration in Form 27C (in duplicate) to the person responsible for collecting such TCS, that the goods mentioned above are to be used for the purpose of manufacturing, processing or producing articles or things and not for trading purposes.

A copy of the declaration so furnished by the buyer to the seller shall be delivered by the seller to the Chief Commissioner or Commissioner before the 7th day of the month next following the month in which the declaration is furnished by him.

tax collected at source 550x392 Tax Collected at Source, TCS Rates in India

Tax Collection at Source at Lower Rate

If the assessing officer is satisfied that the total income of the buyer justifies the collection of TCS at a lower rate, the assessing officer shall, on an application made by the buyer in Form 13, give to him a certificate, as may be appropriate for the collection of tax ay such lower rate.

The certificate so issued by the assessing officer shall be valid till the time such certificate is not cancelled by the assessing officer.

Duty of the person collecting TCS

The buyer who has collected the tax at source is required to apply for a TAN No. This TAN No. is required to be quoted in all TCS Return Forms and also at the time of deposit the TCS collected. The due date for depositing TCS with the govt is the same as the due date of depositing TDS.

The person deducting the TCS is also required to furnish a TCS Return in the specified form and format stating the nature of goods sold, value of goods sold and the TCS Rate thereon.

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