TCS 206C(1H)
An overview of Section 206C 1H
In this post, we will discuss the TCS 206C(1H) of the Income Tax Act 1961. Let’s look at each section in detail :
What is TCS 206C(1H)?
Section 206C of the Income Tax Act 1961 discusses a process called Tax Collection at Source (TCS). Simply put, some sellers collect taxes directly from certain buyers during specific transactions. This helps the government receive its revenue quickly and monitor essential transactions. Sellers must submit the collected tax to the government and file quarterly returns. After paying the tax, buyers can apply for credit on their income tax return.
Eligibility criteria
Under Section 206C, the following criteria must be met for Tax Collection at Source (TCS):
- This restriction only applies to sellers whose total earnings in the previous financial year exceeded Rs. 10 crore.
- TCS is charged for selling particular commodities such as tendu leaves, forest produce, alcohol, and scrap, as stated in Section 206C (1). TCS includes motor vehicle sales (206C(1F)) and external settlements (206C(1G)).
- TCS is not required if the buyer is a Central or State Government, Embassy, High Commission, Legation, Consulate, Foreign State’s Trade Representation, or a local body.
- If the buyer has already deducted TDS from the acquired goods, as required by other requirements of the Income Tax Act, then the seller is not required to collect TCS.
- This rule does not include goods imported into India.
Buyer As per Section 206C (1H)
A buyer may be an individual or a company that purchases products and services from a vendor, online platform, retailer, or wholesaler. Consumers can buy products through bidding, and some purchasers are exempt from TCS collection.
List of exempted buyers:
- Central and State Governments
- Companies operating in the public sector
- Embassy of High Commission
- Consulate and other trade representation of a foreign country.
- A buyer who uses such a purchase to manufacture and produce an object or thing to generate electricity provides a written statement in duplicate.
Seller As per Section 206C (1H)
Some companies and people are classified as sellers who must collect taxes at the source, whereas others are not allowed to.
List of sellers :
- Companies registered under the Companies Act
- Statutory Corporations or Authorities
- Central and State Governments
- Local Authorities,
- Partnership Firms,
- Co-operative Societies,
- HUF or any individual liable for an audit of accounts under the Income-tax Act for a particular fiscal year.
When to collect tax at source
Section 206CCA states that the buyer will pay a higher tax rate if:
- If a buyer still needs to submit an ITR during the two years preceding the year of TCS collection.
- If the total amount of TDS and TCS exceeds Rs. 50,000 for the previous two years.
- The deadline for filing an ITR has expired.
Rate & Calculation of TCS
The TCS rate fluctuates based on the category and value of the sold goods. Below is a chart illustrating the tax rates applicable to various common goods:
Sections | Different types of goods transactions | Tax Rate |
206C(1) | The sale of the following goods: | |
Alcoholic beverages for human consumption | 1% | |
Tendu leaves | 5% | |
Timber obtained through a forest lease. | 2.5% | |
Timber obtained through any means other than under a forest lease | 2.5% | |
Any other forest goods other than wood or tendu leaves. | 2.5% | |
Scrap | 1% | |
Minerals such as lignite, coal, and iron ore. | 1% | |
206C(1C) | Permit of lease or licence for the following: | |
Toll Plaza | 2% | |
Parking Lot | 2% | |
Mining and Quarrying | 2% | |
206C(1F) | Motor vehicle (if the sale price exceeds 10 lakh rupees). | 1% |
206C(1G)(a) | Remittance out of India under the RBI’s Liberalised Remittance Scheme | 5% |
206C(1G)(b) | TCS on marketing an international travel package. | 5% |
206C(1H) | TCS on the sale of any products, excluding commodities on which TCS is applicable under Sections 206C (1), 206C (1F), and 206C (1G)] | 0.10% |
Calculation of TCS
“Due to COVID-19, the rate has been decreased to 0.075% until March 31, 2021.”
The Rs.50 lakh restriction is applicable for the full fiscal year. If a seller gets a payment from a buyer between April 1, 2020, and September 30, 2020, it counts against the buyer’s Rs. 50 lakh limit.
For example, if seller ‘X’ receives Rs.45 lakh from buyer ‘Y’ between April and September 2020 but only Rs.10 lakh on October 10, 2020, the TCS applies. The tax would be levied on Rs. 5 lakh (55 lakh – 50 lakh) at a lower rate of 0.075%.
Due date of depositing TCS
The seller of goods is responsible for collecting and paying TCS to the government. The TCS will be paid by the 7th of next month.
For example, suppose you received Rs 70 lakh from a buyer on December 30, 2021, and collected Rs 2,000 in TCS under Section 206C(1H). Then, you must deposit the dues before January 7, 2022.
Exemptions
TCS is exempt if;
- The products are used for personal consumption.
- Purchased products are utilised in the making and producing of an object or thing, not for commerce.
We have concluded this post on Section 206C. Feel free to share your views and opinions in the comment section below.
FAQ
1. What is Section 206C income tax?
Ans: The seller must collect TCS at the time of sale for specific products and services and deposit it with the government on or before the due date.
2. How Do I Deposit TCS?
Ans: The vendor must file challan 281 within seven days of the month’s end. (Monthly Basis).
3. What happens if TCS isn't collected?
Ans: If the TCS is not paid on or before the due date, the seller will be charged 1% of the entire collection amount.
4. Is TCS refundable in ITR?
Ans: If qualified, TCS can be paid back to the buyer when submitting an ITR.
