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TCS (Tax Collected at Source) Return Filing

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Section 206C of the Income-tax Act

Tax collected by the seller from the buyer on sale so that it can be deposited with the tax authorities. Section 206C of the Income-tax Act governs the goods on which the seller has to collect tax from the buyers.

Tax Collected at Source (TCS) refers to the tax collected by the seller or collector of certain goods or services from the buyer at the point of sale. This mechanism is similar to TDS (Tax Deducted at Source), but in the case of TCS, the tax is collected instead of deducted. The seller is responsible for collecting this tax and remitting it to the government.

TCS is applicable on certain transactions specified under the Income Tax Act, such as the sale of specific goods (e.g., scrap, timber, coal), foreign remittance, and cash withdrawals above a prescribed limit. The rates of TCS depend on the type of goods or services and can vary.

To comply with tax regulations, businesses or entities that collect TCS are required to file TCS returns periodically. These returns provide details of the amount of tax collected, the buyer’s details, and the payment to the government. The return is typically filed quarterly using Form 27EQ, and the due dates for filing vary depending on the quarter. Failure to file TCS returns on time can result in penalties, so businesses must ensure accurate reporting and timely submission to avoid fines or interest.

Ensures Tax Compliance

The legal liability of a private limited company's stockholders is restricted. You will be responsible for paying the liabilities of the company as a shareholder to the extent of your contribution. This protects your personal assets to cover the company's debts.

Improves Revenue Collection

By collecting taxes at the point of sale, TCS helps ensure that taxes are collected in advance, improving the efficiency of government revenue collection.

Reduces Tax Evasion

As the tax is collected by the seller and directly deposited with the government, the chances of tax evasion are reduced, leading to greater transparency in business transactions.

Easy Adjustment of Tax Liability

Buyers who have TCS collected on their purchases can claim it as a tax credit when filing their Income Tax Returns, which can be adjusted against their total tax liability.

Simplifies Tax Administration

TCS simplifies the process for tax authorities by automatically collecting taxes at the point of transaction, reducing the burden of following up with individual taxpayers.

Boosts Compliance for Large Transactions

TCS applies to high-value transactions, ensuring that businesses or individuals engaging in substantial dealings contribute to the tax system without delay.

Eligibility Criteria for TCS (Tax Collected at Source)

Seller’s Obligation:
TCS is applicable to sellers or collectors who are involved in specific transactions, such as the sale of goods (e.g., scrap, timber) or services (e.g., travel packages).
Transaction Type:
TCS applies to high-value transactions like the sale of specified goods, cash withdrawals above a prescribed limit, and foreign remittance.
Threshold Limits:
Sellers or collectors must ensure their sales or transactions exceed the prescribed limits for TCS to apply, as defined under the Income Tax Act.
Business Entity:
Typically, businesses or entities involved in regular trade or commerce are required to collect TCS, with some exceptions.

TCS (Tax Collected at Source) Filing Checklist

TCS Collection Details:
- Record of tax collected on specified goods or services.
TCS Amount:
- Total tax collected during the period.
Buyer Information:
- Buyer’s name, PAN, and transaction details.
Form 27EQ:
- Ensure accurate completion of Form 27EQ for quarterly filing.
Payment Receipts:
- Proof of tax payments made to the government.
Due Dates:
- Adhere to quarterly filing deadlines.
Tax Credit:
- Ensure buyers’ TCS credit is correctly reflected for their Income Tax Returns.

Documents Required for TCS Filing

TCS Collection Records:
- Details of goods or services sold with tax collected.
Buyer’s Information:
- PAN and transaction details of buyers.
Form 27EQ:
- Complete and accurate Form 27EQ for quarterly return filing.
Payment Proof:
- Receipts of TCS payments made to the government.
Tax Credit Certificates:
- Ensure TCS credits are reflected for buyers.

Documents necessary for filing SPICe+ form (INC-32) for the registration of a private limited company are outlined as follows:

A. For Indian Nationals serving as directors and subscribers:

Affidavit on stamp paper: a declaration by all subscribers affirming their intention to become shareholders of the company
Office address proof like the Rental Agreement or Ownership Deed
Electricity bill, water bill and other utility bills of the last two months
Copy of approval if required
Trademark registration details
NOC from property owner
Proof of identity and address

B. Required Documents For Foreign Nationals serving as directors/Shareholders

Passport: Proof of identity
Address proof: Accepted documents include a driving license, residence card, bank statement, or government-issued identification with a valid address.

Types of Tax Collected at Source (TCS)

Section 206C(1) - Sale of Goods

Alcoholic Liquor for Human Consumption: 1% Tendu Leaves: 5% Timber obtained under a forest lease: 2.5% Timber obtained by any mode other than forest lease: 2.5% Any other forest produce (excluding timber and tendu leaves): 2%

2. Section 206C(1F) - TCS on Sale of Motor Vehicles

Motor Vehicles (Exceeding ₹10 Lakhs): 1%

3. Section 206C(1G) - TCS on Foreign Remittance and Overseas Tour Packages

Foreign Remittance under Liberalized Remittance Scheme (LRS) 5% on amounts exceeding ₹7 lakhs in a financial year. 10% if PAN/Aadhaar is not provided.

Section 206C(1H) - TCS on Sale of Goods (General)

Applicable on Sale of Goods exceeding ₹50 Lakhs by the Seller TCS Rate: 0.1% 1% if PAN/Aadhaar is not provided. Exclusions Goods already subject to other TCS provisions or GST.

PVT Companies Limited by Guarantee

Higher TCS Rates If the buyer has not filed their income tax return for the last two years and the TDS/TCS exceeds ₹50,000 in each year, the TCS rate is higher of Twice the specified TCS rate, or 5%.

Here are the key characteristics of Tax Collected at Source (TCS):

Applicable Transactions: Imposed on specific goods/services like alcohol, scrap, minerals, and foreign remittances.
Collected by Sellers: Sellers collect TCS from buyers at the time of sale or payment.
Prescribed Rates: Varies based on goods/services and buyer’s compliance (e.g., PAN availability).
Compliance Requirement: Sellers must deposit the collected tax with the government and file TCS returns.
Non-Filers Penalty: Higher rates apply to non-compliant buyers.

Steps to Register for Tax Collected at Source (TCS)

If you’re required to collect and deposit TCS under the Income Tax Act, follow these steps to register for TCS:

1. Obtain a Tax Deduction and Collection Account Number (TAN)

Mandatory Requirement: TAN is required for all entities collecting TCS.
How to Apply:
- Visit the official NSDL-TIN website (https://www.tin-nsdl.com).
- Choose TAN Registration under “Services”.
- Fill out Form 49B with necessary details like entity name, type, and contact information.
- Pay the application fee online.
- Submit the form and download the acknowledgment receipt.
- Send the acknowledgment receipt to NSDL with required documents (if any).
Once processed, you’ll receive your TAN.

2. Register on the Income Tax E-Filing Portal

Step-by-Step Process:
1. Visit Income Tax E-Filing Portal.
2. Click on Register and select Tax Deductor and Collector.
3. Enter your TAN and other required details like organization type, PAN, and contact information.
4. Validate the registration using OTP sent to the registered email and mobile number.
5. Create a user ID and password for login.

3. Enable GST Registration (if applicable)

If the goods or services fall under GST, ensure your GSTIN is linked to TCS compliance.

4. Compliance Post-Registration

Start collecting TCS from buyers as per applicable rates.
Deposit the collected TCS with the government using the challan ITNS-281.
File quarterly TCS returns using Form 27EQ on the Income Tax Portal.

Let me know if you need further assistance with any step!

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