Quick Summary
TCS is a tax collection mechanism where the seller collects tax from the buyer at the time of sale and deposits it with the government. It applies to specific goods, foreign remittances, and e-commerce transactions.
Tax Collected at Source (TCS) is the tax payable by a seller which he collects from the buyer at the time of sale. It applies to specified goods and services as per the Income Tax Act and is different from TDS where tax is deducted by the payer.
TCS Applicability and Rates
| Nature of Transaction | TCS Rate | Threshold |
|---|---|---|
| Sale of alcoholic liquor for human consumption | 1% | No threshold |
| Sale of tendu leaves, timber, forest produce | 2.5% - 5% | No threshold |
| Sale of scrap, minerals | 1% | No threshold |
| Sale of motor vehicle (>₹10 lakh) | 1% | Above ₹10 lakh |
| Overseas remittance (LRS) under Section 206C(1G) | 5% (20% if no PAN) | Above ₹7 lakh |
| E-commerce transactions (Section 206C(1H)) | 1% | Above ₹5 lakh |
TCS on Foreign Remittance (LRS)
Under Liberalized Remittance Scheme (LRS), TCS at 5% is collected on remittances exceeding ₹7 lakh per financial year for purposes other than education and medical treatment:
- 0.5% for education loans (above ₹7 lakh)
- 5% for education/medical (non-loan, above ₹7 lakh)
- 20% for other purposes (above ₹7 lakh)
- No TCS for remittances up to ₹7 lakh
TCS Compliance
- Seller must have TAN
- Collect TCS at the time of sale/receipt
- Deposit TCS by 7th of next month
- File quarterly TCS returns (Form 27EQ)
- Issue TCS certificates (Form 27D)
Key Points
- Tax collected by seller from buyer
- Applicable to specified goods and services
- LRS remittances attract 5% TCS above ₹7 lakh
- Motor vehicles above ₹10 lakh attract 1% TCS
- E-commerce operators collect TCS at 1%
- Buyer gets credit for TCS paid