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As per Section 206C of the Income Tax Act, 1961 the seller collects tax from the buyer on behalf of the government at the time of the sale. This tax is applicable to only some of the goods mentioned in the table under Section 206C.
Applicability and Rates
(i) Sale of certain goods
Under section 206C(1), sellers of certain goods are required to collect tax from the buyers at the specified rates. The specified percentage for collection of tax at source is as follows:
| Nature of Goods | Percentage |
|---|---|
| Alcoholic liquor for human consumption | 1% |
| Tendu leaves | 5% |
| Timber obtained under a forest lease | 2.5% |
| Timber obtained by any mode other than above | 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% |
(ii) Lease or a licence of parking lot, toll plaza or mine or a quarry
Section 206C(1C) provides for collection of tax by every person who grants a lease or a licence or enters into a contract or otherwise transfers any right or interest in any – parking lot or – toll plaza or – a mine or a quarry to another person (other than a public sector company) for the use of such
parking lot or toll plaza or mine or quarry for the purposes of business. The tax shall be collected as provided, from the licensee or lessee of any such licence, contract or lease of the specified nature, at the rate of 2%.
(iii) Sale of motor vehicle of value exceeding Rs. 10 lakhs
Section 206C(1F) provides that every person, being a seller, who receives any amount as consideration for sale of a motor vehicle of the value exceeding ` 10 lakhs, shall collect tax from the buyer@1% of the sale consideration.
(iv) Overseas remittance or an overseas tour package
Section 206C(1G) provides for collection of tax by every person,
– being an authorized dealer, who receives amount, under the Liberalised Remittance Scheme of the RBI, for overseas remittance from a buyer, being a person remitting such amount out of India;
– being a seller of an overseas tour programme package who receives any amount from the buyer who purchases the package
at the rate of 5% of such amount.
Tax has to be collected at the time of debiting the amount payable by the buyer or at the time of receipt of such amount from the said buyer, by any mode, whichever is earlier.
Rate of TCS in case of collection by an authorized dealer :-
| S. No. | Amount & Purpose of Remittance | Rate of TCS |
|---|---|---|
| (i) | (a) Where the amount is remitted for a purpose other than purchase of overseas tour programme package; and (b) the amount or aggregate of the amounts being remitted by a buyer is less than Rs. 7 lakhs in a financial year |
Nil (No tax to be collected at source) |
| (ii) | (a) where the amount is remitted for a purpose other than purchase of overseas tour programme package; and (b) the amount or aggregate of the amounts in excess of Rs. 7 lakhs is remitted by the buyer in a financial year |
5% of the amt or agg. of amts in excess of Rs. 7 lakh |
| (iii) | (a) where the amount being remitted out is a loan obtained from any financial institution as defined in section 80E, for the purpose of pursuing any education; and (b) the amount or aggregate of the amounts in excess of Rs. 7 lakhs is remitted by the buyer in a financial year |
0.5% of the amt or agg. of amts in excess of Rs. 7 lakh |
Cases where no tax is to be collected
(i) No TCS by the authorized dealer on an amount in respect of which the sum has been collected by the seller
(ii) No TCS, if the buyer is liable to deduct tax at source under any other provision of the Act and has deducted such tax
(iii) No TCS, if the buyer is the Central Government, a State Government, an embassy, a High Commission, a legation, a commission, a consulate, the trade representation of a foreign State, a local authority12 or any other person notified by the Central Government, subject to fulfillment of conditions stipulated thereunder.
CBDT has, vide notification no. 20/200 dated 30.3.2022, notified that the provisions of section 206C(1G) would not apply to an individual who is not resident in India as per section 6(1) and 6(1A), and who is visiting India.
(v) Sale of goods of value exceeding Rs 50 lakh
(a) As per section 206C(1H), tax is also required to be collected by a seller, who receives any amount as consideration for sale of goods of the value or aggregate of such value exceeding Rs. 50 lakhs in a previous year [other than exported goods or goods covered under sub-sections (1)/(1F)/(1G)].
(b) Tax is to be collected at source @0.1% u/s 206C(1H) of the sale consideration exceeding Rs. 50 lakhs, at the time of receipt of consideration.
(c) Tax is, however, not required to be collected if the buyer is liable to deduct tax at source under any other provision of the Act on the goods purchased by him from the seller and has deducted such tax.
(vi) Power of the CBDT to issue guidelines
In case of any difficulty arises in giving effect to the provisions of section 206C(1G)/(1H), the CBDT is empowered to issue guidelines, with the approval of the Central Government, for the purpose of removing the difficulty.
Every guideline issued by the CBDT shall be laid before each House of Parliament, and shall be binding on the income-tax authorities and on the person liable to collect tax.
Higher rate of TCS for non-furnishers of PAN [Section 206CC]
(i) The provisions of section 206CC require tax collection at the higher of the following two rates, in case of failure by the person paying any sum or amount on which tax is collectible at source (collectee) to furnish PAN [PAN or Aadhar number in case of section 206C(1H)] to the person responsible for collecting tax at source (collector) –
a. at twice the rate specified in the relevant provision of the Act
b. at 5% [1%, in case tax is required to be collected at source u/s 206C(1H)]
(ii) Tax would be collectible at the rates mentioned above also in case where the person furnishes a declaration under section 206C(1A) but does not provide his PAN.
(iii) Both the collectee and the collector have to compulsorily quote the PAN of the collectee in all correspondence, bills, vouchers and other documents exchanged between them.
(iv) If the PAN provided to the collector is invalid or it does not belong to the collectee, it shall be deemed that the collectee has not furnished his PAN to the collector. Accordingly, tax would be collectible at the rate specified in (i) above.
(v) The provisions of section 206CC does not apply to a non-resident who does not have a permanent establishment in India.
Higher rate of TCS for non-filers of income-tax return [Section 206CCA]
(i) Section 206CCA requires tax to be collected at source under the provisions of this Chapter on any sum or amount received by a person from a specified person, at higher of the following rates –
(a) at twice the rate specified in the relevant provision of the Act;
(b) at 5%
(ii) In case the provisions of section 206CC are also applicable to the specified person, in addition to the provisions of section 206CCA, then, tax is required to be collected at higher of the two rates provided in section 206CC and section 206CCA.
(iii) Meaning of “specified person” – A person who has not furnished the return of income for assessment year relevant to the previous year immediately preceding the financial year in which tax is required to be collected, for which the time limit for furnishing the return of income under section 139(1) has expired, and the aggregate of tax deducted at source and tax collected at source in his case is Rs. 50,000 or more in the said previous year.
However, the specified person does not include a non-resident who does not have a permanent establishment in India.
Time of Collection of tax
The tax should be collected at the time of debiting of the amount payable by the buyer or licensee or lessee, as the case may be, to his account or at the time of receipt of such amount from the buyer or licensee or lessee, as the case may be, by any mode, whichever is earlier.
In case of sale of a motor vehicle of the value exceeding Rs. 10 lakhs or sale of goods exceeding Rs. 50 lakhs [other than exported goods and goods mentioned in section 206C(1)], tax shall be collected at the time of receipt of such amount under section 206C(1F) and 206C(1H), respectively.
Non-applicability of TCS [Section 206C(1A)]
No collection of tax shall be made under section 206C(1), in the case of a resident buyer, if such buyer furnishes to the person responsible for collecting tax, a declaration in writing in duplicate in the prescribed form and verified in the prescribed manner to the effect that goods referred to in section 206C(1) above are to be utilised for the purpose of manufacturing, processing or producing articles or things or for the purposes of generation of power and not for trading purposes.
Furnishing of copy of declaration within specified time [Section 206C(1B)]
The person responsible for collecting tax under this section shall deliver or cause to be delivered to the Chief Commissioner or Commissioner one copy of the declaration referred to in sub-section (1A) on or before 7th of the month next following the month in which the declaration is furnished to him.
TCS to be paid within prescribed time [Section 206C(3)]
Any amount collected under this section shall be paid within the prescribed time to the credit of the Central Government or as the Board directs.
Main differences between TDS and TCS
| TDS | TCS |
|---|---|
| TDS is tax deduction at source | TCS is tax collection at source |
| Person responsible for paying is required to deduct tax at source at the prescribed rate. | (i)Seller of certain goods isresponsible for collecting tax atsource at the prescribed ratefrom the buyer. (ii)Person who grants licence orlease (in respect of any parkinglot, toll plaza, mine or quarry) isresponsible for collecting tax atsource at the prescribed ratefrom the licensee or lessee, asthe case may be. (iii)Authorised dealer receivingamount for remittance out ofIndia under the LRS of the RBIor seller of an overseas tourprogram package is responsiblefor collecting tax at source atthe prescribed rate from thebuyer. |
| Generally, tax is required to be deducted at the time of credit to the account of the payee or at the time of payment, whichever is earlier. However, in case of payment of salary, payment in respect of life insurance policy etc. tax is required to be deducted at the time of payment. |
Generally, tax is required to be collected at source at the time of debiting of the amount payable by the buyer of certain goods to the account of the buyer or at the time of receipt of such amount from the said buyer, whichever is earlier. However, in case of sale of motor vehicle of the value exceeding Rs. 10 lakhs and sale of goods exceeding Rs. 50 lakhs other than exported goods and goods mentioned in section 206C(1), tax collection at source is required at the time of receipt of sale consideration. |
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