Tax Collection at Source (TCS) is an additional tax collected by sellers of specified goods from buyers, over and above the sale amount. This extra amount is then remitted to the government as per the provisions outlined in Section 206C of the Income Tax Act, 1961.
Here’s a brief overview:
- Goods Covered: Section 206C specifies the goods on the sale of which TCS must be collected by the seller from the buyer.
- Classification of Buyers and Sellers: Understanding the TCS rates involves categorizing buyers and sellers. The table below provides a breakdown of these classifications.ClassificationDescriptionBuyersIdentification of purchasers based on certain criteriaSellersIdentification of sellers based on specific criteria
For detailed information on TCS rates applicable for the Financial Year 2023-2024 (Assessment Year 2024-2025), refer to the TCS rate chart.
In essence, TCS acts as an important mechanism for tax collection, ensuring that sellers play a role in contributing to government revenue by collecting and remitting the specified tax amounts.
| Classification of buyers | Classification of sellers |
| Buyer means a person who buys any goods. The term buyer doesn’t include the following categories of person – · The Central Government; or · The State Government; or · Clubs (such as social clubs and sports clubs); or · An embassy of a High Commission; or · Legation/ consulate/ commission and trade representation of the foreign state. | Seller means following categories of persons – · The Central Government; · The State Government; · Partnership firm; · A local authority; · Statutory corporation/ authority; · Registered company; · Co-operative society; · Any person/ HUF who is subjected to tax audit under the Income Tax. |
TCS Rate Chart as applicable for the Financial Year 2023-2024 (Assessment Year 2024-2025) –
The following table summarizes the applicable TCS rate chart –
| Relevant section | Nature of goods | TCS Rates |
| Section 206C(1) | Alcoholic liquor specifically for human consumption | 1% |
| Section 206C(1) | Tendu leaves | 5% |
| Section 206C(1) | Timber obtained under the forest lease | 2.5% |
| Section 206C(1) | Timber obtained from any other mode | 2.5% |
| Section 206C(1) | Any other forest produce (not being a timber/ tendu leaves) | 2.5% |
| Section 206C(1) | Sale of Scrap | 1% |
| Section 206C(1) | Minerals (being coal/ lignite/ iron ore) | 1% |
| Section 206C(1C) | Lease/ license of the parking lot | 2% |
| Section 206C(1C) | Lease/ license of the toll plaza | 2% |
| Section 206C(1C) | Lease/ license of Mining and quarrying | 2% |
| Section 206C(1F) | Sale of a motor vehicle of value exceeding INR 10 Lakhs | 1% |
| Section 206C(1G) | Foreign remittance under the Liberalised Remittance Scheme of the Reserve Bank of India | 5% (notably with effect from 1st July 2023 the rate will be 20%) |
| Section 206C(1G) | Foreign remittance is less than INR 7 Lakhs in the Financial Year and the remittance is for the purpose of education/ medical treatment | NIL |
| Section 206C(1G) | Foreign remittance in case amount/ aggregate amount exceeds INR 7 Lakhs in the Financial Year and the remittance is for the purpose of education/ medical treatment | 5% |
| Section 206C(1G) | Foreign remittance in case amount/ aggregate amount exceeds INR 7 Lakhs and if the remitted amount is out of the loan that is obtained from Financial Institution u/s 80E for pursuing any education | 0.5% |
| Section 206C(1G) | Overseas tour program package | 5% (notably with effect from 1st July 2023 the rate will be 20%) |
| Section 206C(1H) | Sale of any goods of the value/ aggregate of such value exceeding INR 50 Lakhs [applicable only if total sales/ gross receipts/ turnover of the seller exceeds INR 10 Crores during the preceding Financial Year] | 0.1% |
| Section 206CC(1) | Non-furnishing of Permanent Account Number (PAN) by the collectee to the collector | Higher of the following – · At twice of the rates as prescribed in the relevant provision; or · 5%. Notably, the maximum rate of TCS should not exceed 20%. |
| Section 206CCA(1) | Applicable when all of the following conditions are satisfied – · The person has not furnished income tax return for the Assessment Year (relevant to the previous year) immediately preceding the Financial Year in which TCS was required to be collected; · The time limit for submitting a return under section 139(1) of the Income Tax Act is expired; and · The total of TDS and TCS is INR 50,000 or more in the respective previous year. | Higher of the following – · At twice of the rates as prescribed in the relevant provision; or · 5%. Notably, the maximum rate of TCS should not exceed 20%. |
