Section 206 of Income Tax -TCS on various collection

ALL ABOUT TAX COLLECTED AT SOURCE UNDER SECTION 206C OF INCOME TAX

Hereinunder, we will discuss the TCS [tax collected at source] provisions in detail as per Section 206C of the Income Tax Act,1961.

What is TCS and who has to collect TCS?

Tax Collection at Source or TCS is a source of tax to be collected from the buyer by the Seller on the sale of certain specified items. The tax has to be collected along with the sale proceeds at the rate of tax specified and has to be deposited in the Govt. account within the specified time.

What are the items on which TCS is collectible as per Section 206C(1) and what is the rate of TCS?

The following items are subject to TCS with the rate of TCS:

(a) Alcoholic Liquid for human consumption 1%

(b) Tendu Leaves 5%

(c) Timber obtained under a Forest lease 2.5%

(d) Timber obtained by any mode other than 2.5% under a forest lease

(e) Any other Forest produce not being Tendu 2.5% leaves and timber

(f) Scrap 1%

(g) Minerals, being coal or lignite or iron ore 1%

When TCS is not to be collected?

TCS is not to be collected by Seller from a resident buyer when the said buyer furnishes a declaration in writing in the prescribed form in duplicate that the goods which are being subject to TCS are to be being utilized for manufacturing, processing or producing articles or things or for generation of power and not for the trading purposes.

The said declaration should be filed with the Pr. Commissioner/Commissioner within seven days from the end of the month in which the declaration is received by the seller.

What is TCS on lease or licence as per Section 2061C?

Every person who grants a lease or license or any contract in respect of the following is required to collect TCS at the time of contract or receipt of payment whichever is earlier.

Items on which TCS is applicable are :

(a) Parking Lot 2%

(b) Toll Plaza 2%

(c) Mining & Quarrying 2%

This provision is not applicable in case of lease/license etc. granted to Public Sector Undertaking.

What is TCS on sale of Motor Vehicles above Rs.10 lakhs?

Every Seller of a Motor Vehicle having a value of more than Rs.10 lakhs shall collect 1% TCS on the consideration received from the buyer.

What is TCS on remittance out of India and on tour packages for travel out of India?

As per Section 206(1G), TCS has been applied on :

(a) When any authorized dealer receives any amount from a buyer for remittance out of India under the liberalized scheme of the Reserve Bank of India shall collect TCS @ 5% on the amount to be remitted. However, there is no TCS if the total amount to be remitted out of India is less than 7 lakhs during the financial year. Also if the amount to be remitted is out of any loan taken from a financial institution as defined in Section 80E i.e. for an Educational loan, the rate of TCS will be 0.5% only on the amount over Rs.7 lakhs.

(b) When a Seller receives any amount from the buyer for the purchase of an overseas tour package, TCS has to be collected @ 5%.

What is TCS on the Sale of Goods above Rs.50 lakhs during a financial year?

As per Section 206(1H), any seller who sells goods exceeding Rs.50 lakhs in value to a buyer during a financial year shall collect TCS @ 0.1% on the consideration received from the buyer over Rs.50 lakhs.

However, in this case, Seller means a person whose total turnover/gross receipts from business exceeds Rs.10 Crore during the previous financial year.

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