Tax Collected At Source

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According to Income Tax Act, 1961 there is a provision of tax collection at source, where sellers are required to collect a specified percentage of tax from buyers on exceptional transaction. Section 206C of Income Tax Act,governs the goods on which seller has to collect tax from buyers. Most of these transactions are trading or business in nature.

NATURE OF GOODS APPLICABLE RATES (%)
Alcoholic Liquor for human consumption  1
Tendu leaves  5
Timber obtained under a forest Lease 2.5
Timber obtained by any mode other than under a forest lease 2.5
Any other forest produce not being timber or tendu leaves 2.5
Scrap 1
Minerals, being coal or lignite or iron ore 1
Bullion that exceeds over Rs. 2 lakhs/ Jewellery that exceeds over Rs. 5 lakhs 1
Purchase of Motor vehicle exceeding Rs. 10 Lakhs 1
Parking lot, Toll Plaza and Mining and Quarrying 2

SELLERS AND BUYERS

There are some specific persons who are classified as sellers or who can collect TCS from buyers at the time of transaction. no other person can collect tax at source from buyers apart from list:

  • Central Government
  • State Government
  • Local Authority
  • Statutory Corporation or Authority
  • Company registered under the Companies Act
  • Partnership firms
  • Co-operative Society
  • Any person or HUF who is subjected to an audit of accounts under the Income-tax act for a particular financial year.

A buyer is someone who buys or has agreed to buy goods. However, following buyers are exempted from collection of tax at source.

  • Public sector companies
  • Central Government
  • State Government
  • Embassy of High commission
  • Consulate and other Trade Representation of a Foreign Nation
  • Clubs such as sports clubs and social clubs.

PAYMENTS AND RETURNS

  • In Challan 281 seller deposits the TCS amount within 7 days from the last day of month in which tax is collected
  • All sums collected by an office of government should be deposited on the same day of collection
  • The person who is responsible for collection and submission of tax or after collection doesn’t submit it to the government as per due dates, then he will be liable to pay interest of 1% per month or a part of the month.
  • Tax collector has to submit a quarterly TCS return i.e in FORM 27EQ regarding tax collected by him in a particular quarter.

FORM 27D

On filing of Form 27EQ i.e. quarterly TCS return, tax collector has to provide a TCS certificate to the purchaser of goods. Form 27AD is the certificate issued for TCS returns filed. This certificate has to be issued within 15 days from the date of filing of quarterly return. Certificate contains details regarding:

  • Name of the Seller and Buyer
  • TAN of the seller i.e. who is filing the TCS return quarterly
  • PAN of both seller and buyer
  • Total tax collected by the seller
  • Date of collection
  • The rate of Tax applied

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