In certain payments, the person making the payment must deduct tax at the source at a specific rate. Tax is collected at source by a seller from buyers when selling some prescribed goods. The seller is called the collector, and the buyer the collectee. Commission, rent and brokerage are liable for TCS.
Tax Collected at Source (TCS) is a tax, seller collects from the buyer at the time of sale. The goods 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 under exchange. The service provider or seller only collects the tax from the buyer and deposits to the government.
For example, if a cake is available at a shop at Rs 100 inclusive of taxes, the seller will receive only Rs 90 (TCS rate of 10%). Rs 10 will be the tax collected at the source. The seller must deposit the TCS amount at a designated bank branch that has the authorization to receive such payments. The seller only collects tax from the buyer and does not actually have to pay himself.
There are specific goods for which TCS is collected. A buyer is a person who obtains goods of specified nature in any sale or right to receive goods by tender, auction, etc. And a seller can only collect tax from the buyer.
|Seller (Collects Tax)|
|Statutory Corporation or Authority|
|Company registered under the Companies Act|
|Any person or HUF who is subjected to an audit of accounts under the Income-tax act for a particular financial year.|
There are specific goods covered under TCS. They are taxed only when utilized for trading purposes. The taxes are not payable if the same goods are used for manufacturing, producing things, processing. The rate is different for different categories. The table below shows goods type and the corresponding rate:
|Type of Goods||Rate|
|Liquor of alcoholic nature, made for consumption by humans||1%|
|Purchase of Motor vehicle exceeding Rs. 10 Lakhs||1%|
|Minerals like lignite, coal and iron ore||1%|
|Bullion that exceeds over Rs. 2 lakhs/ Jewellery that exceeds over Rs. 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 produce other than Tendu leaves and timber||2.5%|
Below are important points related to TCS Payments:
In either case, he is liable to pay interest at 1% per month or a part of the month.
In certain circumstances, Tax Collected at Source (TCS) is exempted. Below are the following two cases:
Businesses can save taxes by investing in tax-saving investments. The best tax savings investments for a business is the one that improves business performance. And what better investment than employee benefit schemes. Some of these important plans are:
The premium your organisation pays for these plans you can claim as a business expense. At the same time, you also offer employee benefits at par with the best employers in the country.
Through a group insurance plan, you can cover all employees and their family members. Other than tax benefits, group plans offer additional benefits as below:
As a seller, you have to collect TCS from the buyer when debiting the amount payable to the buyer's account. The rate is different for different categories, and you should accordingly collect TCS.
Deposit the collected TCS to the concerned authority, failing which you will have to pay penalties. Businesses should also explore options to save taxes by investing in group insurance plans.Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised to exercise their caution and not to rely on the contents of the article as conclusive in nature. Readers should research further or consult an expert in this regard.