TCS calculation
TCS Calculation: A Complete Guide to Understanding Tax Collected at Source
- What is Tax Collected at Source (TCS)?
- Who Can Collect TCS?
- When should TCS be Collected?
- TCS Rates for Specific Goods
- Additional TCS Categories
- When will the Higher TCS Rate Apply
- Classification of Seller for TCS
- Classification of Buyers for TCS
- Example of TCS calculation
- TCS Payments & Returns
- TCS Certificate
- TCS Exemptions
- Due date of depositing TCS
- Submission of Form 24G
- Rules where TCS is deposited without a challan under section 206C
- Rules where TDS is Deposited without Challan
- Interest and Penalties
- Differences between TCS and TDS
- FAQs
What is Tax Collected at Source (TCS)?
Tax Collected at Source or TCS is a type of tax that a seller collects from the buyer at the time of sale of certain specified goods or on specific transactions. The seller collects this amount from the buyer and deposits it with the Income Tax Department. TCS is governed by Section 206C of the Income Tax Act.
Sellers who collect TCS must hold a valid TAN (Tax Collection Account Number).
For example, if a bag of rice costs Rs 100 and the applicable TCS is Rs 20, the buyer will pay Rs 120 in total. The seller collects the Rs 20 and deposits it with the government. The seller only collects this tax on behalf of the government.
TCS can apply when goods are sold or when payment is received, depending on the section under which the transaction falls.
Who Can Collect TCS?
TCS applies only to certain goods and certain types of transactions. A seller can collect TCS only if the goods or services fall under the categories notified in Section 206C.
A buyer is any person who purchases those goods or receives the right to receive them, including through auctions or tenders.
When should TCS be Collected?
The seller is required to collect Tax Collected at Source (TCS) at the earlier of the following two instances:
- When they record the amount the buyer owes in their accounting records.
- When they actually receive the payment from the buyer, whether in cash, by cheque, or via draft.
For motor vehicle sales, TCS must be collected when the seller receives payment for the vehicle from the buyer.
TCS Rates for Specific Goods
TCS is collected only when goods are purchased for trading. If the goods are purchased for manufacturing, processing, or production, then TCS does not apply.
Below are the common TCS rates:
| Type of Goods or Transactions | TCS Rate |
| Alcoholic liquor for human consumption | 1% |
| Timber from a leased forest | 2.5% |
| Tendu leaves | 5% |
| Timber from sources other than leased forests | 2.5% |
| Forest products (excluding Tendu leaves and timber) | 2.5% |
| Scrap | 1% |
| Minerals (like lignite, coal, and iron ore) | 1% |
| Motor vehicles costing over Rs. 10 lakh | 1% |
| Parking lots, toll plazas, mining, and quarrying | 2% |
If a seller had a turnover exceeding Rs. 10 crore in the previous financial year and received over Rs. 50 lakh from a buyer, they collect TCS on the amount exceeding Rs. 50 lakh, according to Section 206C(IH).
Note: If the buyer does not provide a PAN, the TCS rate is 1%, but a reduced rate of 0.1% applies in certain circumstances.
Additional TCS Categories
1. TCS on Foreign Remittances and Overseas Tour Packages (Section 206C(1G))
TCS applies on:
- Foreign remittance under LRS
- Overseas tour packages
Important points:
- On foreign remittance exceeding Rs 7 lakh in a financial year, the rate is 5 percent.
- If the buyer does not provide PAN or Aadhaar, the rate becomes 10 percent.
- TCS is collected when the buyer’s account is debited or when payment is received.
2. TCS on Sale of Goods Above Rs 50 Lakh (Section 206C(1H))
This applies when:
- The seller’s turnover exceeded Rs 10 crore in the previous financial year.
- The seller receives more than Rs 50 lakh from a buyer during the year.
TCS applies only to the amount exceeding Rs 50 lakh.
TCS is collected on receipt, not on invoice value.
This does not apply to:
- Exports
- Sale of services
- Buyers who are government bodies
- Goods already covered under other TCS sections
If the buyer has no PAN, the rate becomes 1 percent instead of 0.1 percent.
When will the Higher TCS Rate Apply
Under Section 206CCA, a higher TCS rate applies if:
- The buyer has not filed their ITR for the last two financial years, and
- The due date for filing those returns has passed, and
- Their TDS and TCS together exceeded Rs 50,000 in each of those years.
The higher rate will be the highest of the following:
- Twice the normal TCS rate
- 5 percent
For transactions under Section 206C(1G), if PAN or Aadhaar is not provided, the rate rises to 10 percent.
Classification of Seller for TCS
Only certain people or organisations are allowed to collect tax at source. No other seller can do this, except for those listed below:
- Central and State Governments
- Local Authorities
- 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 for a specific financial year
Classification of Buyers for TCS
- A public sector company
- Central or State Government
- Embassies, High Commissions, and Consulates
- Trade representatives of foreign countries
- Clubs such as sports or social clubs
- A resident who buys goods for manufacturing, processing, or production (not for trading) and gives a declaration for the same
Example of TCS calculation
If a buyer purchases a car worth Rs. 11 lakh from a showroom, the showroom will collect Rs. 11,000 as TCS (Tax Collected at Source). This brings the total amount payable to Rs. 11,11,000 (Rs. 11,00,000 + Rs. 11,000).
In another scenario, if a customer receives an invoice for Rs. 12,000, a 1% TCS of Rs. 120 is added, making the total amount due Rs. 12,120 (Rs. 12,000 + Rs. 120).
TCS Payments & Returns
- All sums collected by a government office must be deposited on the same day they are received.
- Sellers need to deposit TCS (Tax Collected at Source) using Challan 281 within 7 days after the end of the month in which the tax was collected.
- If the tax collector fails to collect or deposit the tax by the due dates, they will incur interest at 1% per month or part of a month on the unpaid amount.
- Tax collectors are required to file a quarterly TCS return using
- Form 27EQ, and any interest due for late TCS payments must be cleared before submitting the return.
TCS Certificate
When a tax collector files their quarterly TCS return using Form 27EQ, they must issue a TCS certificate (Form 27D) to the buyer. This certificate includes the following details:
- Name of the buyer and seller
- TAN of the seller (who files the TCS return)
- PAN of both the buyer and seller
- Total tax collected
- Date of tax collection
- The tax rate applied
The TCS certificate must be issued within 15 days of filing the quarterly TCS return. Below is a summary of the key dates:
| Quarter Ending | TCS Return Filing Due Date (Form 27EQ) | Deadline to Issue TCS Certificate (Form 27D) |
| 30th June | 15th July | 30th July |
| 30th September | 15th October | 30th October |
| 31st December | 15th January | 30th January |
| 31st March | 15th May | 30th May |
If you are unsure about filing TCS returns, feel free to consult tax experts for guidance.
TCS Exemptions
TCS (Tax Collected at Source) is not applicable in these cases:
- When the goods are for personal use.
- When the buyer purchases the goods for manufacturing, processing, or production, rather than for trading.
Due date of depositing TCS
The due date for depositing Tax Collected at Source (TCS) usually depends on the transaction type and tax rate. In general, TCS collected during a quarter must be deposited by the 7th of the following month.
For example, if TCS was collected between April 1st and June 30th, it should be deposited by July 7th.
Submission of Form 24G
Form 24G must be submitted if TCS or TDS is deposited without a challan.
It must be filed:
- Within 15 days from the end of the month
- For March, by 30 April
Form 24G can be submitted:
- With a digital signature
- Electronically with Form 27A
- Through an approved e verification process
The person must also share the Book Identification Number with each deductor.
Rules where TCS is deposited without a challan under section 206C (modifications to Rule 37CA)
- Suppose TCS (Tax Collected at Source) is deposited without a challan. In that case, the person responsible for depositing it to the government must submit Form 24G to the authorised agency as per the Principal Director of Income Tax (Systems).
- Form 24G should be submitted within 15 days after the end of the relevant month.
- For March, Form 24G must be submitted by 30th April.
- Form 24G can be submitted electronically in the following ways:
- With a digital signature
- Along with Form 27A for verification
- Through an approved electronic verification process
- The person submitting Form 24G must inform each deductor of the Book Identification Number (BIN) generated for their deposited TCS.
- The Principal Director General of Income Tax (Systems) will outline the procedure for submitting and verifying Form 24G.
Rules where TDS is Deposited without Challan (changes to Rule 30)
- If TDS is deposited without a challan, the person responsible for reporting and depositing it to the government must submit Form 24G to an agency authorised by the Principal Director of Income Tax (Systems), as per Rule 30(4).
- Form 24G must be submitted within 15 days from the end of the relevant month, except for March, when the deadline is April 30th.
- The form can be submitted in one of the following ways:
- Electronically under a digital signature.
- Electronically with verification in Form 27A.
- It was verified through an electronic process as prescribed.
- The person responsible must also provide the Book Identification Number (BIN) generated for each deductor to whom the TDS has been deposited.
- The Principal Director General of Income Tax (Systems) will specify the procedure for submitting and verifying Form 24G.
Interest and Penalties
- Interest at 1 percent per month or part of a month applies
- Penalty between Rs 10,000 and Rs 1,00,000 may apply for incorrect filing under Section 271H
- Late filing fee under Section 234E may also apply
Differences between TCS and TDS
- TDS is tax deducted at source from income such as salary, interest, rent, or professional fees.
- TCS is tax collected at the time of selling certain specified goods.
TDS reduces the income of the person receiving payment, whereas TCS increases the amount payable by the buyer.
We have reached the end of this post. Please leave your questions in the comments area below.
FAQs
1. Is TCS refundable?
Ans: Yes. TCS collected shows in your Form 26AS and can be used as a tax credit when filing your return.
2. Is TCS included in GSTR 1?
Ans: Yes. TCS is included in the invoice value and is automatically reported in GSTR 1.
3. Should TCS be collected on advance payments?
Ans: Yes. TCS must be collected on advances when the payment is received.
4. What is the TCS rate if PAN and Aadhaar are not linked?
Ans: The TCS rate becomes 5 percent if PAN is not linked with Aadhaar, as the buyer is treated as having no valid PAN.
