TCS

What is TCS?

Tax Collected at Source (TCS) refers to tax collected by a seller from the buyer at the time of sale of specific goods or services, as mandated under the Income Tax Act, 1961. The seller collects this tax and deposits it with the government.

Key Features:

Applicability: On sale of items such as scrap, liquor, timber, foreign remittance, or vehicles above ₹10 lakh.

Rate: Typically ranges between 0.1% and 5%, depending on the nature of goods or transaction.

Compliance:

• Seller collects TCS from buyer.
• Files quarterly TCS returns (Form 27EQ).
• Issues Form 27D to the buyer.
• Credit: The buyer can claim TCS as a tax credit while filing returns.

Example

A car dealer sells a vehicle worth ₹20 lakh. TCS @1% = ₹20,000 is collected from the buyer and deposited with the government.

Why TCS Matters:

It promotes tax transparency and early collection, minimizing underreporting in high-value transactions.