Tax Collected at Source (TCS) – Income Tax [Section 206C]

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Under section 206C in some cases Tax has to be collected at source as below:

Nature of GoodsPercentage Rate of Tax Collection at Source
(TCS) applicable
Category-A (sale of the following)  
A-1. Alcoholic Liquor for Human Consumption
(other than Indian Made Foreign Liquor)
1%
A-2. Tendu Leaves5%
A-3. Timber obtained under a Forest Lease2.50%
A-4. Timber obtained by any mode other than under a Forest Lease2.50%
A-5. Any other Forest Product not being Timber or Tendu Leaves2.50%
A-6. Scrap1%
A-7. Minerals, being Coal or Lignite or Iron Ore1%
Category-B (Grant of Lease / License of the following)  
B1. Parking Lot, Toll Plaza, Mining and Quarrying (other than mining and quarrying of mineral oil, petroleum and natural gas)2%
Category D (sale of the following whether payment is received by cheque or by any other mode) – 
D1. Motor vehicle of the value exceeding Rs. 10 lakhs1%

No Surcharges, Education Cess or SHEC shall be added to the above Rates. Hence, Tax will be Collected at Source (TCS) at the Basic Rate.

Tax Collected at Source-TCS
Tax Collected at Source-TCS

Table of Contents

1. Profit and Gains from the Business of trading in Alcoholic Liquor, Forest Produce, Scrap, etc. [Section 206C] 

Section 206C relating to tax collection at source is applicable in the following two cases: 

(A) Tax be collected by seller from the buyer in respect of sale of specified goods. 

(B) Tax to be collected by a person granting lease/licence right in case of Parking Lot, Toll Plaza or Mining and Quarrying. 

(A) Seller to collect tax from buyer in respect of sale of certain specified goods 

(1) Tax to be collected at the time of debiting/receipt of the amount from buyer [Section 206C (1)] 

Every person, being a seller shall, at the time of debiting of the amount payable by the buyer to the account of  the buyer or at the time of receipt of such amount from the said buyer, whichever is earlier, collect from the buyer  as income tax, the sum specified in the following table on the goods mentioned therein: 

Nature of Goods% of TCS
Category-A (sale of the following)  
A-1. Alcoholic Liquor for Human Consumption
(other than Indian Made Foreign Liquor)
1%
A-2. Tendu Leaves5%
A-3. Timber obtained under a Forest Lease2.50%
A-4. Timber obtained by any mode other than under a Forest Lease2.50%
A-5. Any other Forest Product not being Timber or Tendu Leaves2.50%
A-6. Scrap1%
A-7. Minerals, being Coal or Lignite or Iron Ore1%
Meaning of Scrap:

“Scrap” means waste and scrap from the manufacture or mechanical working of materials which is definitely not usable as such because of breakage, cutting up, wear and other reasons. [Explanation (b) to section 206C] 

  • No surcharge, health and education cess shall be added to the above rates. Hence, tax will be collected at source at the basic rate 
  • Self-declaration by buyer if relevant goods are purchased for manufacturing or producing any articles or things [Section 206C(1A) & rule 37C]

Notwithstanding anything contained in section 206C(1), no collection of tax shall be made in the case of a  buyer, who is resident in India, if such buyer furnishes to the person responsible for collecting tax, a declaration in  writing in duplicate in the prescribed form (Form No. 27C) and verified in the prescribed manner to the effect that  the goods referred to in column (2) of the aforesaid Table are to be utilised for the purposes of manufacturing,  processing or producing articles or things or for the purpose of generation of power and not for trading purposes. 

  • Declaration furnished under section 206C(1A) to be delivered to the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner [Section 206C(1B)] 

The person responsible for collecting tax under this section shall deliver or cause to be delivered to the  Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner one copy of  the declaration referred to in section 206C(1A) on or before the seventh day of the month next following the  month in which the declaration is furnished to him. 

(2). TCS on Sale of Motor Vehicle exceeding the value of ₹10,00,000 [Section 206C(1F)]

Every person, being a seller, who receives any amount as consideration for sale of a motor vehicle of the value exceeding ₹10,00,000, shall, at the time of receipt of such amount, collect from the buyer, a sum equal to 1% of the sale consideration as income-tax. 

Meaning of “seller”

“Seller” means: 

  • the Central Government, or 
  • a State Government, or 
  • any local authority, or 
  • corporation or authority established by or under a Central, State or Provincial Act, or 
  • any company, or 
  • firm, or 
  • co-operative society. 

It also includes an individual or a Hindu undivided family whose total sales, gross receipts or turnover from  the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of  section 44AB during the financial year immediately preceding the financial year in which the goods of the nature  specified in the Table in sub-section (1) are sold. 

Meaning of “buyer” 

“Buyer” with respect to— 

(i)            Section 206C (1) means a person who obtains in any sale, by way of auction, tender or any other mode, goods of the nature specified in the Table in sub-section (1) or the right to receive any such goods but does not include, — 

  • a public sector company, the Central Government, a State Government, and an embassy, a High Commission, legation, commission, consulate and the trade representation, of a foreign State and a club; or 
  • a buyer in the retail sale of such goods purchased by him for personal consumption;

(iii)          “sub-section (1F) means a person who obtains in any sale, goods of the nature specified in the said subsection, but does not include, — 

(A) the Central Government, a State Government and an embassy, a High Commission, legation, commission, consulate and the trade representation of a foreign State; or 

(B) a local authority as defined in Explanation to clause (20) of section 10; or 

(C) a public sector company which is engaged in the business of carrying passengers.” 

In other words, the Act has exempted the following class of buyers such as the Central Government, a State  Government, an embassy, a High Commission, legation, commission, consulate and the trade representation of a  foreign State; local authority as defined in explanation to clause (20) of section 10; a public sector company  which is engaged in the business of carrying passengers, from the applicability of the provision of sub-section  (1F) of section 206C of the Act (relating to TCS on motor vehicle). 

(B) Tax to be collected at source in case of Parking Lot, Toll Plaza or Mining and Quarrying [Section 206C(1C)] 

The scope of section 206C has been further extended by inserting the following sub-section (1C). 

Every person, who grants a lease or a licence or enters into a contract or otherwise transfers any right or  interest either in whole or in part in any parking lot or toll plaza or mine or quarry, to another person, other than a  public sector company (hereafter in this section referred to as “licensee or lessee”) for the use of such parking lot  or toll plaza or mine or quarry for the purpose of business shall, at the time of debiting of the amount payable by  the licensee or lessee to the account of the licensee or lessee or at the time of receipt of such amount from the  licensee or lessee in case or by the issue of a cheque or draft or by any other mode, whichever is earlier, collect  from the licensee or lessee of any such licence, contract or lease of the nature specified in column (2) of the Table  below, a sum equal to the percentage, specified in the corresponding entry in column (3) of the said Table, of such  amount as income-tax: 

SL No. % TCS
(i)Parking Lot2%
(ii)Toll Plaza2%
(iii)Mining and Quarrying2%

2. Higher Rate of TCS if PAN is not furnished by collectee [Section 206CC]

(1) Higher rate of TCS if the collectee does not furnish PAN [Section 206CC (1)]:

Notwithstanding  anything contained in any other provisions of this Act, any person paying any sum or amount, on which tax is  collectible at source under Chapter XVII-BB (herein referred to as collectee) shall furnish his Permanent Account  Number to the person responsible for collecting such tax (herein referred to as collector), failing which tax shall  be collected at the higher of the following rates, namely:— 

  • at twice the rate specified in the relevant provision of this Act; or 
  • at the rate of 5%

(2) Declaration in Form No. 27C not valid if PAN is not provided [Section 206CC (2)]:

No declaration under section 206C(1A) in Form No. 27C shall be valid unless the person furnishes his Permanent Account Number in such declaration. 

(3) Consequences if the declaration furnished is invalid [Section 206CC (3)]:

In case any declaration becomes invalid under section 206CC (2), the collector shall collect the tax at source in accordance with the provisions of section 206CC (1). 

(4) Application for obtaining certificate for lower deduction of TCS [Section 206CC (4)]:

No certificate under section 206C (9) shall be granted unless the application in Form No. 13 made under that section contains the Permanent Account Number (PAN) of the applicant. 

(5) Colletor and collectee to indicate PAN in all correspondence, bills, etc. [Section 206CC (5)]:

The collectee shall furnish his Permanent Account Number to the collector and both shall indicate the same in all the correspondence, bills, vouchers and other documents which are sent to each other. 

(6) Invalid or wrong PAN will attract TCS as per section 206CC(1) [Section 206CC(6)]:

Where the Permanent Account Number provided to the collector is invalid or does not belong to the collectee, it shall be deemed that the collectee has not furnished his Permanent Account Number to the collector and the provisions of sub-section (1) shall apply accordingly. 

(7) Provisions not applicable in case of non-resident have been no PE in India [Section 206CC (7)]:

The provisions of this section shall not apply to a non-resident who does not have permanent establishment in India. 

3. Time and mode of payment of TCS to Government Account under Section 206C [Section 206C (3) and Rule 37CA] 

(A) Time of Payment 

All sums collected in accordance with the provisions of section 206C(1), or (1C), shall be paid to the credit of the Central Government as under. 

(i) Where tax is collected by an office of the Government 

  • on the same day where the tax is so paid without production of an income tax challan; and 
  • on or before seven days from the end of the month in which the collection is made, where tax is paid accompanied by an income tax challan. 

(ii) In any other case 

Within one week from the last day of the month in which the collection is made. 

(B) Mode of payment 

(i). Where office of the Government makes the payment without production of challan 

In case of an office of the Government where tax has been paid to the credit of the Central Government without the production of a challan i.e. through book entry [Rule 37CA(3)] 

Where tax has been paid to the credit of the Central Government without the production of a challan, the Pay  and Accounts Officer or the Treasury Officer or the Cheque Drawing and Disbursing Officer or any other person  by whatever name called to whom the collector reports the tax so collected and who is responsible for crediting  such sum to the credit of the Central Government, shall submit a statement in Form No. 24G to the agency  authorised by the Principal Director of the Income Tax (Systems) in respect of Tax Collected by the collectors and reported to him.

(ii) Where the tax is to be deposited accompanied by income tax challan:

The tax collected under subsection  (1) or subsection (1C) or sub-section (1D) [(ID) omitted w.e.f. 1.4.2017] or sub-section (1F)1 of section 206C  shall be deposited to the credit of the Central Government by remitting it within the time specified in clause (b) of  sub rule (1) or in sub rule (2) into any branch of: 

  • the Reserve Bank of India, or 
  • the State Bank of India, or 
  • any authorised bank. 

(iii) Where tax is to be deposited electronically by person referred to in rule 125(1):

The amount collected shall be electronically remitted into the Reserve Bank of India or the State Bank of India or any authorised bank accompanied by an electronic income tax challan. 

(C). Who is required to make Electronic Payment of TCS [Rule 125(1)]?

The following persons shall pay tax electronically on or after 1-4-2008: — 

(a) a company; and

(b) a person (other than a company), to whom provisions of section 44AB are applicable. 

(i) Due date of filing quarterly statement [Rule 31AA (2)] 

Quarterly statement in Form No. 27EQ should be delivered or caused to be delivered within the due date specified as under: 

SL. No.Quarter of the financial year endedDue date 
1.30th June15th July of the financial year
2.30th September15th October of the financial year
3.31st December15th January of the financial yea
4.31st March15th May of the financial year immediately following the financial year in which collection is made

(ii) Manner of filing quarterly statement [Rule 31AA(3)(i)]. 

The statement referred to in rule 31AA (1) may be furnished in any of the following manners, namely: — 

(a) furnishing the statement in paper form; 

(b) furnishing the statement electronically under digital signature in accordance with the procedures, formats and standards specified under rule 31AA (5); 

(c) furnishing the statement electronically along with the verification of the statement in Form 27A or verified through an electronic process in accordance with the procedures, formats and standards specified under rule 31AA (5). 

(iii) E-filing of quarterly statements of TCS mandatory in certain cases [Rule 31AA(3)(ii)]:

Where, —

  • the collector is an office of the Government; or
  • the collector is the principal officer of a company; or
  • the collector is a person who is required to get his accounts audited under section 44AB in the immediately preceding financial year;
  • the number of collectee’s records in a statement for any quarter of the financial year are twenty or more, the collector shall furnish the statement in the manner specified in item (b) or item (c) of clause (i) of rule 31AA (3).

The collector shall furnish the statement in the following manner:

  • furnishing the statement electronically under digital signature in accordance with the procedures, formats and standards specified under rule 31AA (5).
  • furnishing the statement electronically along with the verification of the statement in Form 27A or verified through an electronic process in accordance with the procedures, formats and standards specified under rule 31AA (5).
Collectors other than the above may also opt to file statement on computer media [Rule 31AA(3)(iii)]:

A person other than the above, responsible for collecting tax at source, may at his option, deliver or cause to be delivered the statements electronically along with the verification of statement in Form 27A.

(iv) Procedure for filing quarterly TCS statement [Rule 31AA(4)]:

The collector at the time of preparing statements of tax collected (TCS) shall,—

  • quote his tax deduction and collection account number (TAN) in the statement;
  • quote his permanent account number (PAN) in the statement except in the case where the collector is an office of the Government;
  • quote the permanent account number of all collectees;
  • furnish particulars of the tax paid to the Central Government including book identification number or challan identification number, as the case may be.
  • furnish particulars of amount received or debited on which tax was not collected in view of the furnishing of declaration in Form 27C under section 206C(1A) by the buyer.

(v) Procedure for e-filing of TCS Statement

The collector at the time of preparing statements of tax collected shall, —

  • quote his tax deduction and collection account number (TAN) in the statement;
  • quote his permanent account number (PAN) in the statement except in the case where the collector is an office of the Government;
  • quote the permanent account number of all collectees;
  • furnish particulars of the tax paid to the Central Government including book identification number or challan identification number, as the case may be.
  • furnish particulars of amount received or debited on which tax was not collected in view of the furnishing of declaration under section 206C(1A) by the buyer.

The Principal Director General of Income-tax (Systems) or Director General of Income-tax (Systems) shall specify the procedures, formats and standards for the purposes of furnishing and verification of the TCS Statements and shall be responsible for the day-to-day administration in relation to furnishing and verification of the TCS Statements in the manner so specified.

4. Issue of TCS Certificate [ Section 206C (5) & Rule 37D]

The person responsible for collecting the tax is required to issue a Certificate of Collection of Tax at Source (TCS) to the collectee in Form No.- 27D within 5 days from the due date of furnishing the statement of tax collected at source specified under rule 31AA (2) [Rule 37D (1) & (3)].

In other words, certificate in Form No. 27D should be issued within the time limit specified as under:

Quarter ending 30th June30th July
Quarter ending 30th September30th October
Quarter ending 31st December30th January
Quarter ending 31st. March30th May

As per rule 37D (2) the above certificate shall specify:

  • valid Permanent Account Number (PAN) of the collectee;
  • valid Tax Deduction and Collection Account Number (TAN) of the collector;
  • (i)book identification number or numbers where deposit of tax collected is without production of challan in case of an office of the Government;
    (ii)challan identification number or numbers in case of payment through bank;
  • receipt number of the relevant quarterly statement of tax collected at source which is furnished in accordance with the provisions of rule 3IAA.

Further, prescribed income-tax authority or person authorized by such authority shall prepare and deliver to the buyer or license or lessee as the case may be. a statement in Form 26AS specifying the amount of tax collected and such other particulars as may be prescribed.

Issue of Duplicate Certificate [Rule 37D(4)]:

The collector may issue a duplicate certificate in Form No. 27D if the collectee has lost the original certificate so issued and makes a request for issuance of a duplicate certificate and such duplicate certificate is certified as duplicate by the collector.

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