Tax Collected at Source

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Tax Collected at Source

The Income Tax Act of India has many provisions for taxpayers. One such provision is tax collected at source. It is the tax that is collected from the buyer on specified goods that the seller sells.

Sellers are responsible for collecting these taxes. When filing an income tax return, the buyer can claim back the tax collected at the source.

The tax collected at source(TCS) depends on several factors, such as the nature of payments, the applicable tax rate, and the payment amount.

In this guide, we will explore the details of tax collected at the source.

What is Tax Collected at Source (TCS)?

TCS, also known as tax collected at source, is the income tax collected from the buyer by the seller on the sale of certain goods.

The objective or goal of the tax collected at source is that the government authority can track the high-value transaction from the buyer and also get revenue at the earliest point in time.

Section 206 of the Income Tax Act mentions the services and goods to which the tax collected at source is applicable.

Classification of Seller for TCS

Specified organisations and individuals are classified as sellers for tax collection at source. Only specified vendors or persons can collect TCS; other entities and individuals can not collect TCS. These specified organisations or vendors include:

  • Local authority

  • State government

  • Central government

  • Cooperative society

  • Partnership firms

  • Statutory authority or corporation

  • Companies that are registered under the Companies Act.

  • Individuals or HUFs whose accounts are audited as per the Income Tax Act for the financial year.

Classification of Buyer for TCS

The buyer is the person or organisation that collects specified goods or services from the seller through an online platform, auction, tender, etc. Buyers can also receive goods or services by bidding on them. However, specific buyers are exempted from paying TCS to sellers. These buyers include:

  • State government.

  • Central government.

  • Embassy of High Commission.

  • Trade or consulate representation of foreign nations.

  • Public sector companies.

  • Clubs such as sports or social clubs.

Goods Covered Under Tax Collected At Source

Goods and services can be used for different purposes. Their purpose determines the tax applicable to goods and services..

Trading of Goods: Trading of goods is the act of purchasing goods from one party and selling them to another. Goods used for trading purposes are subject to tax collected at the source.

Processing, Manufacturing, and Producing Other Products: However, if the goods are further used for processing, manufacturing, and producing other products, they are exempt from the tax; hence, no TCS is applicable.

Type of Goods and TCS Rate

Below are the types of goods and applicable tax collected at the source rate.

Type of Goods TCS Rate
Alcoholic Liquor for Human Consumption 1.00%
Mineral like iron, ignite and coal 1.00%
Scrap 1.00%
Purchase of motor vehicle exceeding  ₹10 Lakh 1.00%
Bullion that exceeds  ₹2 lakhs per Jewellery that exceeds  ₹5 lakhs. 1.00%
Timber wood under forest leased  2.50%
Timber wood from another source than forest leased 2.50%
Quarrying, and mining, toll plaza, parking lot 2.00%
Forest produce other than tendu leaves or timber 2.50%
Tendu leaves 5.00%

TCS Due Dates

Below is the date of submission for tax collected at source.

Quarter Due Date for Filing TCS return in Form 27EQ Period
1st Quarter 15th July 1st April to 30th June
2nd Quarter 15th October 1st July to 30th September
3rd Quarter 15th January 1st October to 31st December
4th Quarter 15th May 1st January to 31st March

TCS Payments & Returns

  • The collected amount by any government office must be deposited on the same day of collection.

  • The seller can deposit the tax collected at the source using Challan 281 within seven days from the last day of the month in which the tax was collected.

  • In cases where a tax collector is responsible for collecting tax and depositing it to the government and fails to collect a tax or deposit it to authority within a decided time frame, he is liable to pay an interest rate of 1% each month or portion of the month.

  • The tax collector is responsible for submitting quarterly TCS returns using Form 27EQ, mentioning all the taxes they collected during the quarter. Further, the tax collector is also responsible for paying interest on delay in payment of TCS before filing the return.

TCS Certificate

The tax certificate is issued to the recipient of goods and services or buyers by the Indian government when the tax collector files their quarterly TCS return through Form 27EQ. The TCS certificate contains the following information:

Name of the Seller and Buyer

Date of collection

PAN of both seller and buyer

TAN of the seller

Rate of tax applied

Total tax collected by the seller.

The certificate is generally issued after 15 days from the date of filing returns.

Provision for Tax Collected at Source Under GST for e-Commerce Sale

  • All the e-commerce traders and dealers need to be mandatorily registered under GST.

  • Any dealer or trader selling goods online gets the payment online after deducting the tax @ 1 % under the IGST Act.

  • The collected tax should be deposited to the government by the 10th of next month.

TCS Exemption

There are certain exemptions for TCS collection, such as:

  • When the eligible goods are used for personal usage.

  • The goods are purchased for manufacturing, processing and production and not for trading.


Tax collected at source (TCS) is a crucial income tax applicable to the sale of specified services and goods. TCS is generally collected at the time of sale. It is the seller's responsibility to collect TCS from the buyer.

Government and corporate collectors can file TCS returns in electronic format. Failure to file a TCS can invite a penalty of a minimum of ₹10,000 and a maximum of ₹ 100,000.

Is a Health Insurance Plan Applicable for Tax Deduction?

Many individuals look for ways to save taxes while filing the income tax returns. Individuals who purchase a medical insurance plan can claim tax deductions under Section 80D for the premium paid during the financial year.

Other than this, health insurance also offers financial security to individuals during medical crises. The plan comes with a cashless health insurance benefit where individuals can take cashless treatment in any hospital.

Individuals can get various benefits, from post-hospitalisation expenses to daycare to AYUSH coverage in health insurance plans. Tata AIG is one of the reputable insurance providers that offers health insurance plans catered to individual specific medical needs.

Disclaimer / TnC

Your policy is subjected to terms and conditions & inclusions and exclusions mentioned in your policy wording. Please go through the documents carefully.

Related Articles

Is tax collected at source refundable?

Is tax collected at source refundable?


If the individual has paid the TCS more than is applicable, then they can claim the refund at the time of filing an income tax return.

Is there a penalty for not filing or wrongly filing TCS?


If a tax collector fails to file TCS on time or filed the wrong TCS, a penalty of at least ₹10,000 and a maximum ₹1,00,000 is liable.

What is the difference between deduction and collection of tax at source?


Tax collection at source(TCS) is collected by the seller from the buyer at the time of sale of specified goods, while tax deduction at source (TDS) is deducted by a company or individual while making a payment.

Is it possible to file TCS online?


Yes, tax collectors and the government can file the TCS online.