What is Tax Collected at Source (TCS)? Payment, Exemption & Rates Explained

Written by : Knowledge Centre Team

2026-07-30

1177 Views

7 minutes read

Introducing BSE 500 Enhanced Value 50 Fund with Promise4Wealth

50 High-Potential Companies, One Smart Decision

Name is required Name should be Valid

Mobile Number is required Mobile Number should be Valid

Email is required Email should be Valid

DOB is required DOB should be Valid

Annual Income*

< 3 3-5 5-7 7-10 > 10

Annual Income is required

I agree that even if my contact number is registered with NDNC / NCPR, I would still want the Company to contact me on the given number and email id for the clarifications/product information sought by me and agree that I have read and understood the Privacy Policy and agree to abide by the same.

Please tick to proceed further.

Thank you for your interest in our product. Our financial expert will connect with you shortly to help you choose the best plan.

Tax Collected at Source (TCS) plays an important role in India’s tax system by ensuring that tax is collected at the point of sale itself. It applies to specific goods and services, making sellers responsible for collecting tax from buyers and depositing it with the government. For businesses and individuals alike, understanding how TCS works is essential to remaining compliant and avoiding unnecessary penalties.

With multiple TCS slabs, varying TCS rates, and specific rules under Section 206C, navigating TCS can seem complex at first. However, once you understand when TCS applies, how to pay TCS, and how it reflects in income tax records, managing it becomes much simpler.

Key Takeaways

TCS is collected by the seller at the time of sale on specified goods and services under Section 206C
The TCS rate varies based on the nature of goods, such as scrap, liquor, motor vehicles, or the purchase of goods above thresholds
TCS collected must be deposited on time and reported through the prescribed return forms
Buyers can claim the TCS amount as a credit or rebate in their income tax return
Understanding TCS slabs and exemptions helps businesses stay compliant and avoid penalties

What is TCS?

Tax Collected at Source (TCS) is a tax, seller collects from the buyer at the time of sale of specified goods and services. The goods on which TCS is applicable are specified under Section 206C of the Income Tax Act, 1961. The rate of TCS will vary based on the type of product or service being exchanged. The service provider or seller collects the tax from the buyer and deposits to the government.

For example, if a product is sold for ₹100 and the applicable TCS rate is 10%, the seller collects ₹10 as TCS from the buyer. The seller effectively retains ₹90 as the sale value and deposits the ₹10 TCS amount with an authorised bank on behalf of the government. The seller does not bear the tax liability personally but merely facilitates its collection and remittance.

Save Taxes While Building Long-Term Wealth

Full Name* Please enter correct name Please enter the Full name

Enter your mobile number* Please enter valid mobile number Please enter Mobile Number

Email* Please enter valid email Please enter Email

By submitting my details, I request the company to call me and override my NDNC/ NCPR registration and authorize the Company and its representatives, including its third-party vendors, to validate, evaluate and process this proposal and also to contact me via email, phone, WhatsApp or any other mode. I also provide my consent to share my IP address & location to the company for risk assessment. I confirm that, I have read and understood the Company’s Privacy Policy and agree to abide by it

...Read more Consent is required

Who Can Collect TCS?

Tax Collected at Source (TCS) is collected by the seller of specified goods or services, as defined under Section 206C of the Income Tax Act, 1961. The responsibility to collect TCS lies solely with the person or entity selling the goods or providing the service, not the buyer.

The term “seller” includes individuals, companies, firms, or other entities that are engaged in transactions covered under the Act. These sellers act as tax collectors on behalf of the government, collecting the prescribed amount from the buyer at the time of sale.

To be eligible to collect and deposit TCS, the seller must obtain a Tax Collection Account Number (TAN). The collected tax must then be deposited with the government within the specified timelines, ensuring compliance with income tax regulations.

What is Covered Under TCS?

Certain goods are covered under TCS. They are taxed only when utilised for trading purposes. The taxes are not payable if the same goods are used for manufacturing, producing things, or processing. The rate is different acrosscategories. The table below shows the goods type and the corresponding rate:

Type of Goods	Rate
Liquor of alcoholic nature, made for consumption by humans	1%
Scrap	1%
Purchase of a motor vehicle exceeding ₹10 lakhs	1%
Minerals like lignite, coal and iron ore	1%
Bullion that exceeds ₹2 lakhs/ Jewellery that exceeds ₹5 lakhs	1%
Parking lot, Toll Plaza and Mining and Quarrying	2%
Timber wood under a forest leased	2.5%
Timber wood by any other mode than forest leased	2.5%
A forest produces other products other than Tendu leaves and timber	2.5%
Tendu leaves	5%

Important Facts about TCS Payments & Returns

Understanding the basics of TCS payments and returns ensures smoother compliance and accurate tax reporting. Below are some important facts you can keep in mind:

Deposit TCS Amount Within One Week: The seller has to deposit the TCS amount in Challan 281 by the 7th of next month (except for March, where the due date is the 30th of April).
Make Payment at an Authorised Branch: The seller can make the payment in any authorised bank. Also, they can make the payment electronically.
Deposit Amount on the Same Day: All the amounts collected by an office of the government should be deposited on the same day.
Tax Collector Responsible for Submitting TCS: There could be two cases:
1. The tax collector does not collect taxes
2. He collects taxes but does not pay them to the government before the due dates

In either case, he is liable to pay interest at 1% per month or a part of the month.

Tax Collector Furnishes Return Form: The tax collector must furnish Form 27EQ online to CPC-TDS in electronic mode within the prescribed time.
Correction Allowed: The collector can file a correction statement for rectification of any mistake, add/delete, or update the information already furnished.
Exemptions from TCS: In certain circumstances, Tax Collected at Source (TCS) is exempted. Below are the following two cases:
1. The buyer buys the goods for manufacturing, processing, or production, but not for trading
2. When the buyer purchases goods for personal consumption
TCS Under GST:
1. Dealers and traders have to get the business registered under GST. It is mandatory for them
2. Dealers selling goods online would get the payment from the online platform after deducting an amount of tax at 1% under the IGST Act
3. The dealer has to deposit the tax by the 10th of the next month to the government

Conclusion

TCS is not an additional tax burden but a mechanism to ensure timely tax collection and reporting. When collected and deposited correctly, it benefits both the government and the taxpayer by improving transparency and reducing tax evasion. For businesses, timely compliance with TCS requirements helps maintain smooth operations and protects them from interest and penalties. Staying informed about TCS rules allows businesses to focus on growth while remaining fully compliant with tax regulations.

Glossary

Tax Collected at Source (TCS): Tax collected by the seller from the buyer on specified transactions under the Income Tax Act
Collector: The seller who is responsible for collecting and depositing TCS with the government
Collectee: The buyer from whom tax is collected at the time of purchase
Section 206C: Provision of the Income Tax Act that governs TCS rates, applicability, and compliance
Form 27EQ: Quarterly statement filed by the tax collector to report TCS details

FAQs

The TCS rate on the purchase of goods under Section 206C(1H) is generally 0.1% when the buyer’s purchases exceed the prescribed threshold, subject to PAN availability and exclusions.

To know how to pay TCS, the collector must deposit the amount using Challan 281 through authorised banks or online portals within 7 days. Once deposited, the TCS tax is reflected in the buyer’s Form 26AS

Yes, TCS on rent applies to specified cases such as lease payments for parking lots, toll plazas, or mining. The TCS percentage depends on the nature of the asset and applicable slab rates.

The TCS rebate in income tax can be claimed by the collectee while filing the return. The amount is adjusted against the total tax liability or refunded if excess tax has been paid.

Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.

Tax Announcements and its Impact on Taxpayers

What is Corporate Tax in India? Rates, Slabs & Tax Planning

Recent Blogs

Declare Income Sources In Itr Thum Desktop

Tax Savings - Top Selling Plans

We bring you a collection of popular Canara HSBC life insurance plans. Forget the dusty brochures and endless offline visits! Dive into the features of our top-selling online insurance plans and buy the one that meets your goals and requirements. You and your wallet will be thankful in the future as we brighten up your financial future with these plans.

Family Shield: Enhanced Protection

iSelect Smart360 Term Plan

3 Plan options
Life cover till 99 years
Steady income benefit
Block your premium at inception

Fixed Returns, Zero Risks & Worries

iSelect Guaranteed Future Plus

4 Plan options
Life cover + Guaranteed benefits
Accidental death benefit
Premium protection cover

Start Young, Pay Less, Stay Secured

Young Term Plan

Life cover till 99 years
Coverage for spouse
Block your premium rate
Covers 40 critical illness

Tax Collected at Source (TCS): Payment, Exemption & Rates

Key Takeaways

What is TCS?

Save Taxes While Building Long-Term Wealth

Enter OTP

Application Status

Name

Date of Birth

Plan Name

Status

Unclaimed Amount of the Policyholder as on

Name of the policy holder

Policy No.

Address of the Policyholder as per records

Unclaimed Amount

Request Registered

Who Can Collect TCS?

What is Covered Under TCS?