TAX COLLECTED AT SOURCE (TCS) is governed by Section 206C of The Income Tax Act, 1961. Tax collected at source is Tax payable by the seller which he collects from the buyer. The Credit of TCS shall be given to the person to whom it is collected. Vide Finance Act 2020, Govt widen the scope of TCS by introducing section 206C(1H) & 206C(1G).
Earlier the TCS needs to be collected on sale of certain goods but with the introduction of Section 206C(1H) it widens the scope of TCS Collection, now almost all business entities are covered under the ambit of TCS.
Section 206C(1H): Every person, being a seller, who receives any amount as consideration for sale of any goods of the value or aggregate of such value exceeding fifty lakh rupees in any previous year, other than the goods being exported out of India or goods covered in sub-section (1) or sub-section (1F) or sub-section (1G) shall, at the time of receipt of such amount, collect from the buyer, a sum equal to 0.1 per cent of the sale consideration exceeding fifty lakh rupees as income-tax.
Further clarification provided by CBDT vide Circular No. 17/20 dated 29.09.2020. These are explained below:
- This provision would apply on all sale considerations received on or after 1st October 2020.
- The collection is required to be made at the time of receipt of the amount of sales consideration.
- The rate of TCS is reduced to 0.075% from 14-05-2020 to 31-03-2021 (due to COVID Pandemic) after that it will be 0.1%.
- This provision shall not apply on the sale consideration received for fuel supplied to non-resident airlines at airports in India.
- Further clarity has been provided in regards to sale of Motor vehicle. The difference between 206C(1F) & 206C(1H) has been clarified through circular. While 206C(1F) is based on single sale of motor vehicle, sub-section (1 H) is for receipt above 50 lakh rupees during the previous year against aggregate sale of good. While sub-section (1F) is for sale to consumer only and not to dealers, sub-section (1H) is for all sale above the prescribed threshold. Receipt of sale consideration from a dealer would be subjected to TCS under 206C(1H), if such sales are not subjected to TCS under sub-section (1 F) of section 206C of the Act.
- The receipt of sale consideration from a buyer towards sale of goods shall include the GST amount also.
- No adjustment on account of sale return or discount is required to be made for collection of tax under sub-section (1H) of section 206C of the Act since the collection is made with reference to receipt of amount of sale consideration.
For determining the eligibility of the seller to collect TCS on sale of any goods:
Turnover in the immediately preceding financial year needs to be checked whether it exceeds Rs. 10 crore or not. While computing the turnover for preceding FY, GST will be included.
For collecting the tax:
The receipt of consideration for the sale of any goods with the buyer in excess of Rs. 50 Lakh in the current financial year needs to be checked.
| Particulars | Case-1 | Case-2 | Case-3 |
| Receipt on account of Sale of Goods from 1st Apr to 30th Sept 20 | 40 Lakhs | 70 Lakhs | 40 Lakhs |
| Receipt on 5th Oct 20 | 6 Lakhs | 5 Lakhs | 25 Lakhs |
| TCS Applicability | Nil | 5 Lakhs (Rs. 5 lakhs x 0.1%) | 15 Lakhs (Rs. 15 Lakhs x 0.1%) |
| Explanation | Not exceeding the Threshold of Rs. 50 Lakhs. | Exceeding the Threshold of Rs. 50 Lakhs. TCS will be collected on amount received from 1st Oct 20 onwards. | Exceeding the Threshold of Rs. 50 Lakhs. TCS will be collected on amount received from 1st Oct 20 onwards. The TCS will be collected on amount exceeding the threshold value. |
