Tax Collected at Source

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.

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.

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 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.

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

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

• 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.

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.

• 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.

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.

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.