1. TCS Applicability: Seller and Buyer Classifications

Tax Collected at Source (TCS) is a system under which the seller collects tax from the buyer at the time of the sale of specified goods or services. This provision applies to certain sellers and buyers as per the Income Tax Act, 1961. Let’s understand the classifications for both sellers and buyers under TCS.

Seller Classifications for TCS

The seller responsible for collecting TCS is referred to as the Tax Collector (TC). The following entities must collect TCS:

• Central Government
• State Government
• Local Authority
• Statutory Corporations or Authorities
• Companies Registered under the Companies Act
• Partnership Firms
• Co-operative Societies
• Individuals or HUFs whose Accounts are Audited under the Income Tax Act

These sellers are required to collect TCS on the sale of specified goods as outlined by the Income Tax Act.

Buyer Classifications for TCS

A buyer refers to an individual or entity purchasing goods or acquiring rights to goods through transactions such as tenders or auctions. However, certain buyers are exempt from paying TCS:

• Public Sector Companies
• Central Government
• State Government
• Embassy of High Commissions
• Consulates and Trade Representatives of Foreign Nations
• Clubs (e.g., Sports and Social Clubs)

These buyers do not need to pay TCS on transactions involving specified goods or services.

2. Goods Covered under TCS

TCS applies to specific goods based on their usage. Goods are classified based on whether they are intended for trading or manufacturing, which determines whether TCS applies.

Trading of Goods

TCS applies when goods are purchased for trading purposes. Trading involves buying goods from one party and selling them to another. Goods sold for trading are subject to TCS.

Manufacturing, Processing, or Producing Other Products

TCS does not apply when goods are used in manufacturing, processing, or production. These goods are exempt from TCS as they are treated as raw materials in the production process.

3. TCS Rate Chart (FY: 2024-25, AY: 2025-26)

Here are the TCS rates for various categories of payments under the Income Tax Act for the financial year 2024-25:

Note : 

If the payee does not provide a PAN, the TCS rate will double the rate mentioned above or 5%, whichever is higher.

4. TCS Return Due Dates

TCS returns must be filed according to the following due dates:

• Quarter Ending 30th June: 15th July (Form 27EQ), 30th July (Form 27D)
• Quarter Ending 30th September: 15th October (Form 27EQ), 30th October (Form 27D)
• Quarter Ending 31st December: 15th January (Form 27EQ), 30th January (Form 27D)
• Quarter Ending 31st March: 15th May (Form 27EQ), 30th May (Form 27D)

5. Certificate of Tax Collected at Source

The seller must submit the Certificate of TCS (Form 27D) within one week from the last day of the month in which the tax was paid. If the certificate is lost, the tax collection agency can issue a new certificate.

6. Interest on Non-payment of Tax

If the tax collector fails to collect or deposit the tax on time, interest at the rate of 1% per month (or part of the month) will be charged on the outstanding tax amount.

7. Penalty for Incorrect Filing of TCS Return

A penalty can be imposed under Section 271H for incorrect TCS returns, ranging from ₹10,000 to ₹1,00,000 depending on the severity of the mistake.

8. e-TCS

e-TCS refers to the electronic filing of TCS returns. Government and corporate collectors must file TCS returns electronically, while other collectors have the option to file either electronically or on paper. NSDL receives e-TCS returns on behalf of the Income Tax Department.

9. TCS Exemptions

TCS is exempt in the following cases:

• Goods purchased for personal consumption
• Goods purchased for manufacturing, processing, or production (and not for trading)

10. Difference Between TDS and TCS

• Applicability: TDS applies to various payments (salary, interest, professional fees), while TCS applies to the sale of specific goods (e.g., scrap, tendu leaves).
• Payment Amount: TDS is deducted when the payment exceeds a certain threshold, while TCS applies based on the type of goods sold, regardless of the payment amount.
• Rate: TDS is deducted based on the type of payment, while TCS is collected at a flat rate depending on the goods or services involved.

11. Key Changes in TCS Rates in Budget 2024

Frequently Asked Questions

• What is TCS?
  TCS is a mechanism where the seller collects tax at the time of selling specified goods or services.

• Who is required to collect TCS?
  Sellers like government entities, companies, partnership firms, and certain individuals must collect TCS.

• Who is exempt from paying TCS?
  Exempt buyers include public sector companies, the central government, embassies, and certain clubs.

• What goods are subject to TCS?
  TCS applies to specified goods such as timber, scrap, tendu leaves, and bullion.

• When is TCS applicable?
  TCS applies when goods are sold for trading purposes.

• What is the rate of TCS for scrap?
  The TCS rate for scrap has been revised to 0.75%.

• What is the due date for filing TCS returns?
  Returns are due on 15th July, 15th October, 15th January, and 15th May, depending on the quarter.

• What is Form 27D and when is it issued?
  Form 27D is the certificate of TCS, issued within one week from the tax payment.

• What happens if the TCS certificate is lost?
  A new certificate can be issued by the tax collection agency.

• What are the penalties for incorrect TCS returns?
  A penalty between ₹10,000 and ₹1,00,000 may be imposed for errors in TCS returns.