TCS Chart For FY 2023-2024 (AY 2024-2025)

Tax Collected at Source, or TCS, is a provision of the Indian Income Tax Act. In accordance with these provisions, certain individuals are required to collect from their buyers a predetermined percentage of tax on exceptional transactions. The majority of these transactions are commercial or trading-related. It has no impact on the average person.

Budget 2023 increased tax collection at source (TCS) for foreign remittances made under LRS from 5% to 20%. This will include international travel, sending money abroad, and other remittances, aside from medical and educational needs. The new regulation will become effective on July 1, 2023.

What is Tax Collected at Source (TCS)?

Tax collected at source (TCS) refers to the tax that the seller collects from the buyer at the point of sale so that it can be deposited with the tax authorities. The goods on which the seller is required to collect tax from the buyers are governed by Section 206C of the Income-tax Act. To be able to collect TCS, such individuals need to have a Tax Collection Account Number.

TCS Rate Chart for FY 2023-24

Additional Points for TCS Under Section 206C

Additional Points for Section 206C (1)

• No TCS if the resident buyer furnishes a declaration to the seller that goods are to be utilized in the manufacturing/ production of any article or for the purpose of generation of power.
• Scrap means waste from the manufacture or mechanical working of materials which is definitely not usable as such because of breakage, cutting up, wear and other reasons.

Additional Points for Section 206C (1C)

• For the purpose of this section, Mining and quarrying shall not include mining and quarrying of mineral oil including petroleum and natural gas.

Additional Points for Section 206C (1F)

• Public Sector Company engaged in the business of carrying passengers, CG, SG, Embassy, High Commission, trade representative, Local authority, etc.

Additional Points for Section 206C (1G)

• OTPP means any tour package that offers a visit to a country or countries or territory outside India and includes expenses for travel or hotel stay or boarding or lodging or any other expenses of a similar nature.

Additional Points for Section 206C (1H)

• If the buyer deducted TDS under any section then TCS is not applicable under this section.
• If the buyer does not submit a PAN or Aadhar card then the TCS rate will be 1% instead of 0.1% in this section.
• Under this section, TCS collected only at the time of receiving consideration in excess of Rs. 50 lakhs in a financial year.
• In the case of the sale of fuel to NR Airlines companies at Indian Airport are not liable for TCS under this section.
• No need for any adjustment for GST or sale returns as TCS under this section is applicable on receipt of consideration.

When Will a Higher TCS Rate Apply?

The buyer will be charged tax at a higher rate (other than the rates in the above table) in accordance with Section 206CCA if the buyer has:

• Not filed an ITR for the two fiscal years prior to the applicable fiscal year in which TCS was due.
• The ITR filing deadline has passed.
• In each of these two financial years, the combined TCS and TDS amount exceeded Rs. 50,000.

The applicable TCS rate will be the following two TCS rates at such a higher rate:

• The TCS rate is twice what is indicated in the Income Tax Act (in the table above)
• Or 5%

In special circumstances described in Section 206C(IG), 5% TCS is applicable when an authorized dealer arranges a remittance out of India of at least Rs. 7 lakhs from a foreign currency buyer remitting under the Liberalized Remittance Scheme (LRS), which is not a package deal for an international tour. TCS is 10% if PAN or Aadhaar are not available. Such TCS is collected either when money is received or when the buyer's account is debited.

Classification of Seller for TCS

For tax collected at the source, a certain group of people or organizations have been designated as sellers. Aside from the following list, no other seller of goods may collect tax at source from the purchasers:

• Central Government
• State Government
• Local Authority
• A Statutory Authority or Corporation
• A Business that has a Companies Act registration
• Partnership firms
• Co-operative Society

Any Individual or HUF that was the subject of an audit of accounts under the Income-tax Act for any financial year.

Classification of Buyers for TCS

A buyer is a person who purchases goods of a certain nature through a sale or a right to purchase such goods through an auction, tender, or other means. 
The buyers listed below are exempt from source tax collection, though. In other words, TCS does not have to be obtained from the people listed below. 

• Public sector organizations
• Central Government
• State Government
• The High Commission's Embassy
• Consulate and other Foreign Nation's Trade Representation
• Clubs like social clubs and sports clubs

In cases where the resident buyer uses the purchase to generate power or manufacture, process, or produce goods (rather than for trading), and the buyer makes this declaration in writing, in duplicate.

When Should TCS be Collected?

The earlier of the following two dates is when the seller must collect TCS:

• As soon as the buyer's payment is debited from their account in the books of accounts.
• Upon receiving payment from the buyer in any form, including cash, issuing a check or draft.

When a motor vehicle is sold, the TCS is paid once the buyer pays for the vehicle in cash or another form of payment.

Example of TCS Calculation

In the event that a box of chocolates costs Rs. 100, the purchaser must pay Rs. 20 as tax collected (Rs. 80 plus Rs 20) at the time of transaction. After that, the money is transferred to a specific bank branch that has been authorized to accept payments. This tax is not the seller's responsibility to pay; rather, it is his or her responsibility to collect it from the customer. The tax is meant to be collected during sales, transactions, when receiving cash from the buyer, or when issuing a check or draft, depending on which method is paid first.

Let Us Use Two Examples to Illustrate How TCS Functions.

• In the event that a customer buys a car from a showroom valued at Rs. 15 lakh, the showroom will collect and deposit Rs. 15,000 as TCS. Therefore, Rs. 15,15,000 must be collected in total from the buyer.
• The customer received an invoice for Rs. 10,000 on which 1% TCS was assessed and collected at Rs. 100. Therefore, the customer must pay a total of Rs. 10,100.

Other Considerations Need to Know For TCS Under Section 206C

TCS Payments & Returns

• Every amount that a government office collects must be deposited the same day it is collected.
• The seller must deposit the TCS amount in Challan 281 within seven days of the last day of the tax collection month (if it is monthly).
• 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 required to pay interest at the rate of 1% per month, or a portion of a month, until the tax is deposited.
• Each tax collector is required to submit a TCS return on a quarterly basis, in Form 27EQ, for the taxes they have collected during that quarter. Before filing the return, the interest on the TCS payment that was delayed to the government must be paid.

TCS Certificate

A TCS certificate must be given to the buyer of the goods when the tax collector files his Form 27EQ, the quarterly TCS return..
The certificate provided for submitted TCS returns is Form 27D. The following information is included in this certificate:

• Names of the Buyer and the Seller
• TAN of the seller, i.e., the person filing the quarterly TCS return
• PAN of the buyer and the seller
• Total tax that the seller has collected
• Collection date
• The applicable tax rate

This certificate must be issued no later than 15 days after the TCS quarterly returns were submitted.

Due Date of filing TCS Returns and Certificate

The table below summarizes all of the TCS due dates:

TCS Exemptions

In the following circumstances, tax collection at the source is not required:

• Whenever the products are used for personal use
• The buyer does not purchase the goods with the intention of trading them; rather, they are purchased for manufacturing, processing, or production.

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