Tax Collected at Source (TCS) – Rates, Payment, and Exemption
Tax Collected at Source (TCS) is a form of income tax collected by the seller from the buyer at the point of sale. It is governed under Section 206C of the Income Tax Act, 1961 and is applicable to certain types of goods, services, and transactions. TCS is aimed at collecting tax in advance from individuals who generate income through the purchase of specific goods or services.
This guide covers everything you need to know about TCS, including applicable rates, payment timelines, exemptions, and filing procedures.
What is Tax Collected at Source (TCS)?
TCS is the tax that a seller collects from the buyer while selling certain specified goods or services. The collected tax is then deposited with the Income Tax Department. Unlike TDS (Tax Deducted at Source), which is deducted from income or payments, TCS is added to the sale price and is borne by the buyer.
For example, when a dealer sells scrap to a manufacturer, a percentage of the sale price is collected as TCS and deposited to the government.
Who is Required to Collect TCS?
The obligation to collect TCS lies with the seller, which includes:
- Central and State governments
- Local authorities
- Statutory corporations or authorities
- Companies registered under the Companies Act
- Partnership firms
- Co-operative societies
- Individuals or HUFs (if their turnover exceeds prescribed limits under tax audit)
TCS on Foreign Remittance & LRS Transactions (Budget 2023-24)
A major update in TCS was the inclusion of foreign remittances and overseas tour packages under the Liberalised Remittance Scheme (LRS).
- TCS at 5% on remittances above ₹7 lakh for education or medical treatment.
- TCS at 20% on remittances for other purposes and overseas tour packages.
- TCS at 0.5% for education loans (if financed via a loan from financial institution).
TCS Payment Due Dates
Sellers collecting TCS must deposit it with the Income Tax Department by the 7th of the following month.
For Example:
If TCS is collected in July, it must be deposited by 7th August.
TCS Return Filing – Form 27EQ
TCS collectors must file quarterly returns using Form 27EQ. This return includes:
- PAN of the buyer
- TCS amount collected and deposited
- Nature of goods sold
- Date of collection
| Quarter |
Due Date |
| April - June |
15th July |
| July - September |
15th October |
| October - December |
15th January |
| January - March |
15th May |
Exemptions from TCS
TCS is not applicable in certain cases:
- When the buyer uses the goods for personal consumption and provides a declaration in Form 27C.
- If the buyer is a government body, embassy, or High Commission.
- On export of goods out of India.
- If TCS threshold is not crossed (depends on transaction nature).
- If the buyer provides a certificate for lower or nil TCS under Section 206C(9).
Consequences of Non-Compliance
- Failing to collect or deposit TCS on time can result in:
- Interest @ 1% per month or part of the month.
- Penalty equal to the TCS amount under Section 271CA.
- Disallowance of expenses in income tax computation.
TCS vs TDS – Key Differences
| Criteria |
TDS (Tax Deducted at Source) |
TCS (Tax Collected at Source) |
| Who deducts |
Payer |
Seller |
| Nature |
Deducted before making payment |
Collected at the time of sale |
| Applicable on |
Salary, interest, rent, etc. |
Sale of specified goods |
| Governing Section |
Section 192 to 196D |
Section 206C |
Conclusion
Tax Collected at Source (TCS) ensures tax compliance in high-risk and high-value transactions by shifting part of the tax responsibility to sellers. Whether you're a buyer, seller, or professional, understanding how TCS works is essential for proper tax planning and compliance. Be sure to check the latest rates, exemptions, and filing timelines to avoid penalties and interest.
