CBDT Circulars on TCS

By | October 26, 2016
(Last Updated On: January 28, 2017)

CBDT Circulars on TCS / Instructions, FAQ’s on TCS

CBDT Circulars on TCS :-

  • CLARIFICATIONS ON AMENDMENT MADE BY FINANCE ACT, 2016 [CIRCULAR NO.23/2016 [F.NO.370142/17/2016-TPL], DATED 24-6-2016] -para 1.1-1
  • CLARIFICATIONS ON AMENDMENT MADE IN SECTION 206C BY FINANCE ACT, 2016 [ CIRCULAR NO.22/2016 [F.NO.370142/17/2016-TPL], DATED 8-6-2016] para 1.1-2
  • PROCEDURE FOR ONLINE SUBMISSION OF STATEMENT OF DEDUCTION OF TAX UNDER SECTION 200(3) AND STATEMENT OF COLLECTION OF TAX UNDER PROVISO TO SECTION 206C(3) [NOTIFICATION NO.11/2016 [F.NO.DGIT(S)-ADG(S)-2/E-FILING NOTIFICATION /106/2016] , DATED 22-6-2016 ] Para 1.1-3

  • ISSUE OF CERTIFICATE OF LOWER COLLECTION OF INCOME-TAX AT SOURCE UNDER SECTION 206C(9) [INSTRUCTION NO. 4/2010 [F. NO. 275/23/2007-IT(B)], DATED 21-7-2010 ] Para 1.1-4
  • CERTIFICATE FOR DEDUCTION AT LOWER RATE – ADVISORY FOR DEDUCTORS SECTION 197, READ WITH SECTIONS 195, 206C, OF THE INCOME-TAX ACT, 1961 – DEDUCTION OF TAX AT SOURCE  [PRESS RELEASE, DATED 1-1-2016] Para 1.1-5

 

1.1-1 CLARIFICATIONS ON AMENDMENT MADE BY FINANCE ACT, 2016

CIRCULAR NO.23/2016 [F.NO.370142/17/2016-TPL], DATED 24-6-2016

In order to curb the cash economy, Finance Act, 2016 has amended section 206C of the Income-tax Act to provide that the seller shall collect tax at the rate of one per cent from the purchaser on sale in cash of certain goods or provision of services exceeding two lakhs rupees. Subsequent to the amendment, a number of representations were received from various stakeholders with regard to the scope of the provisions and the procedure to be followed in case of the amended provisions of section 206C of the Act. The Board, after examining the representations of the stakeholders, issued FAQs vide circular No. 22/2016 dated 8th June, 2016. The Board has further decided to clarify the issue as regards applicability of the provisions relating to levy of TCS where the sale consideration received is partly in cash and partly in cheque by issue of an addendum to the above circular in the form of question and answer as under:

Question 1: Whether tax collection at source under section 206C(1D) at the rate of 1% will apply in cases where the sale consideration received is partly in cash and partly in cheque and the cash receipt is less than two lakhs rupees.

Answer : No. Tax collection at source will not be levied if the cash receipt does not exceed two lakhs rupees even if the sale consideration exceeds two lakhs rupees.

Illustration: Goods worth Rs. 5 lakhs is sold for which the consideration amounting to Rs. 4 lakhs has been received in cheque and Rs. l lakh has been received in cash. As the cash receipt does not exceed Rs. 2 lakhs, no tax is required to be collected at source as per section 206C(1D).

Question 2: Whether tax collection at source under section 206C(1D) will apply only to cash component or in respect of whole of sales consideration.

Answer: Under section 206C(1D), the tax is required to be collected at source on cash component of the sales consideration and not on the whole of sales consideration.

Illustration: Goods worth Rs. 5 lakhs is sold for which the consideration amounting to Rs. 2 lakhs has been received in cheque and Rs. 3 lakhs has been received in cash. Tax is required to be collected under section 206C(1D) only on cash receipt of Rs. 3 lakhs and not on the whole of sales consideration of Rs. 5 lakhs.

1.1-2 CLARIFICATIONS ON AMENDMENT MADE IN SECTION 206C BY FINANCE ACT, 2016

CIRCULAR NO.22/2016 [F.NO.370142/17/2016-TPL], DATED 8-6-2016

Section 206C of the Income-tax Act, 1961 (hereafter referred to as ‘Act’), prior to amendment by Finance Act, 2016. provided that the seller shall collect tax at source at specified rate from the buyer at the time of sale of specified items such as alcoholic liquor for human consumption, tender leaves, mineral being coal or lignite or iron ore etc. It also provided for collection of tax at source at the rate of one per cent on sale in cash of bullion exceeding 2 lakh rupees and jewellery exceeding 5 lakh rupees.

In order to reduce the cash transactions in sale of goods and services. Finance Act, 2016 has expanded the scope of section 206C (1D) to provide that the seller shall collect tax at the rate of one per cent from the purchaser on sale in cash of any goods (other than bullion and jewellery) or providing of any services (other than payment on which tax is deducted at source under Chapter XVII-B) exceeding two lakh rupees. So far as sale of Jewellery and bullion is concerned, the provisions of sub-section (1D) of section 206C prior to its amendment by the Finance Act, 2016 shall continue to apply. Further, with a view to bring high value transactions within the tax net, it has been provided in sub-section (1F) of section 206C of the Act that the seller who receives consideration for sale of a motor vehicle exceeding ten lakh rupees, shall collect one per cent of the sale consideration as tax from the buyer. Any person who obtains in any sale, the goods of the nature specified in sub-section (1D) or (1F) of section 206C is a buyer. The seller for the purposes of collection of tax under section 206C shall be—

(i) A Central Government or a state Government.

(ii) Any local authority, or corporation or authority established under any Central, State or Provincial Act,(iii) Any company, firm or co-operative society,

(iv) An individual or Hindu undivided family who is liable to audit as per provisions of section 44AB during the financial year immediately preceding the financial year in which the goods are sold or the services are provided.

The amendments brought in section 206C by Finance Act, 2016 are applicable form 1st June 2016.

In this regard a number of queries have been received about the scope of the provisions and the procedure to be followed. The board has considered the same and decided to clarify the points raised by issue of a circular in the form of questions and answers as follows:

Question 1: Whether tax collection at source (‘TCS’) at the rate of 1% is on sale of Motor Vehicle at retail level or also on sale of motor vehicles by manufacturers to dealers/distributors.

Answer: To bring high value transactions within the tax net, section 206C of the Act has been amended to provide that the seller shall collect the tax at the rate of one per cent from the purchaser on sale of motor vehicle of the value exceeding ten lakh rupees. This is brought to cover all transactions of retail sales and accordingly it will not apply on sale of motor vehicles by manufacturers to dealers/distributors.

Question 2: Whether TCS at the rate of 1% is on sale of Motor Vehicle is applicable only to Luxury Cars?

Answer: No. As per sub-section (1F) of section 206C of the Act the seller shall collect the tax at the rate of one per cent from the purchaser on sale of any motor vehicle of the value exceeding ten lakh rupees.

Question 3: Whether TCS at the rate of 1% is applicable in the case of sale to Government Departments, Embassies, Consulates and United Nation Institutions for sale of motor vehicle or any other goods or provision of services?

Answer: Government, institutions notified under United Nations (Privileges and Immunities) Act, 1947. and Embassies, Consulates. High Commission. Legation, Commission and trade representation of a foreign State and shall not be liable to levy of TCS at the rate of 1% under sub-section (1D) and (1F) of section 206C of the Act.

Question 4: Whether TCS is applicable on each sale of motor vehicle or on aggregate value of sale during the year?

Answer: Tax is to be collected at source at the rate of 1% on sale consideration of a motor vehicle exceeding ten lakh rupees. It is applicable to each sale and not to aggregate value of sale made during the year. This can be explained by way of an illustration:

Illustration: Motor vehicle worth 20 lakh is sold and for which payments are made in instalments, one at the time of booking and the other at the time of delivery . At the time of booking 5 lakh rupees are paid and 15 lakh rupees are paid at the time of delivery. Tax at the rate of 1% on 5 lakh rupees at the time of booking and at the rate of 1% on remaining 15 lakh rupees at the time of delivery shall be collected at source.

Similar will be the position with regard to collection of tax at source under sub-section (1D) of section 206C.

Question 5: whether TCS at the rate of 1% on sale of motor vehicle is applicable in case of an individual?

Answer: The definition of “Seller” as given in clause (c) of the Explanation below sub-section (11) of section 206C shall be applicable in the case of sale of motor vehicles also Accordingly, an individual who is liable to audit as per the provisions of section 44AB of the Act during the financial year immediately preceding the financial year in which the motor vehicle is sold shall be liable for collection of tax at source on sale of motor vehicle by him.

Question 6: How would the provisions of TCS on sale of motor vehicle be applicable in a case where part of the payment is made in cash and part is made by cheque?

Answer: The provisions of TCS on sale of motor vehicle exceeding ten lakh rupees is not dependent on mode of payment. Any sale of Motor Vehicle exceeding ten lakh would attract TCS at the rate of 1%.

Question 7: As per section 206C (1D), tax is to be collected at source at the rate of 1% if sale consideration received in cash exceeds 2 lakh rupees whereas as per section 206C (1F) tax is to be collected at source at the rate of 1% of the sale consideration of a motor vehicle exceeding 10 lakh rupees . Whether TCS will be made under both sub-sections (1D) and (1F) of the section 206C @ 2%, where part of the payment for purchase of motor vehicle exceeds 2 lakh rupees in cash?

Answer: Sub-section (1F) of the section 206C of the Act provides for TCS at the rate of 1% on sale of motor vehicle of value exceeding 10 lakh rupees. This is irrespective of the mode of payment. Thus if the value of motor vehicle is 20 lakh rupees, out of which 5 lakh rupees has been paid in cash and balance amount by way of cheque, the tax shall be collected at source at the rate of 1% on total sale consideration of 20 lakh rupees only under sub-section (1F) of section 206C of the Act. However, if a vehicle is sold for 8 lakh rupees and the consideration is paid in cash, tax shall be collected at source at the rate of 1% on 8 lakh rupees as per sub-section (1D) of section 206C of the Act.

1.1-3 PROCEDURE FOR ONLINE SUBMISSION OF STATEMENT OF DEDUCTION OF TAX UNDER SECTION 200(3) AND STATEMENT OF COLLECTION OF TAX UNDER PROVISO TO SECTION 206C(3)

NOTIFICATION NO.11/2016 [F.NO.DGIT(S)-ADG(S)-2/E-FILING NOTIFICATION /106/2016] , DATED 22-6-2016

The provisions relating to the statement of deduction of tax under sub-section (3) of section 200 and the statement of collection of tax under proviso to sub-section (3) of section 206C of the Income-tax Act, 1961 (the Act) are prescribed under rule 31A and rule 31AA of the Income-tax Rules, 1962 (the Rules) respectively. As per sub-rule (5) of rule 31A and sub-rule (5) of rule 31AA of the Rules, the Director General of Income-tax (Systems) shall specify the procedures, formats and standards for the purposes of furnishing and verification of the statements and shall be responsible for the day to day administration in relation to furnishing and verification of the statements in the manner so specified.

2. In exercise of power conferred by sub-rule (5) of rule 31A and sub-rule (5) of rule 31AA of the Rules, the Principal Director General of Income-tax (Systems) hereby lays down the following procedures of registration in the e-filing portal, the manner of the preparation of the statements and submission of the statements as follows:

3. The deductors/collectors will have the option of online filing of e-TDS/TCS returns through e-filing portal or submission at TIN Facilitation Centres. Procedure for filing e-TDS/TCS statement online through e-filing portal is as under:

a. Registration: The deductor/collector should hold valid TAN and is required to be registered in the e-filing website (https://incometaxindiaefiling.gov.in/) as “Tax Deductor & Collector” to file the “e-TDS/e-TCS Return”.

b. Preparation: The Return Preparation Utility (RPU) to prepare the TDS/TCS Statement and File Validation Utility(FVU) to validate the Statements can be downloaded from the tin-nsdl website (https://www.tin-nsdl.com/). The statement is required to be uploaded as a zip file and submitted using either Digital Signature Certificate (DSC) or Electronic Verification Code (EVC). For DSC mode, the signature for the zip file can be generated using the DSC Management Utility (available under Downloads in the e-Filing website http://incometaxindiaefiling.gov.in/). Alternatively, deductor/collector can e-Verify using EVC.

c. Submission: The deductor/collector is required to login to the e-filing website using TAN and go to TDS -> Upload TDS. The deductor/collector is required to upload the “Zip” file along with the signature file (generated as explained in para (b) above) or EVC.

4. EVC can be generated using one of the following modes:

a. Net Banking – Principal contact person’s net banking login (linked to the registered PAN) can be used to generate the EVC for the TAN of the deductor/collector.

b. Aadhar OTP – The principal contact person’s PAN can be linked with AADHAAR to use this option.

c. Bank Account Number – The principal contact person can use his pre-validated bank account details to avail this option.

d. Demat Account Number – The principal contact person can use his pre-validated demat account details to avail this option.

This pre-generated EVC can be used to e-Verify the TDS return.

5. Once uploaded, the status of the statement shall be shown as “Uploaded”. The uploaded file shall be processed and validated. Upon validation, the status shall be shown as either “Accepted” or “Rejected which will reflect within 24 hours from the time of upload. The status of uploaded file is visible at TDS -> View Filed TDS. In case the submitted file is “Rejected”, the rejection reason shall be displayed.

1.1-4 ISSUE OF CERTIFICATE OF LOWER COLLECTION OF INCOME-TAX AT SOURCE UNDER SECTION 206C(9)

INSTRUCTION NO. 4/2010 [F. NO. 275/23/2007-IT(B)], DATED 21-7-2010

I am directed to state that Instruction No. 8/2006, dated 13-10-2006 was issued by the Board making it mandatory to get prior administrative approval of Additional Commissioner of Income-tax/Joint Commissioner of Income-tax before issue of any certificate of lower deduction of tax at source under section 197 of the Income-tax Act, 1961. Further, Instruction No. 7/2009, dated 23-12-2009 was issued communicating prior administrative approval of the Commissioner of Income-tax (TDS) in the cases where the cumulative amount of tax foregone by non-deduction/lesser rate of deduction of tax arising out of certificate under section 197 during the financial year for a particular assessee exceeds Rupees Fifty lakh in major stations and Rupees Ten lakh for other stations.

2. For effective monitoring and control of tax foregone through certificate of lower Tax Collection at Source (TCS), I am directed to communicate that for issue of certificate of lower collection for tax at source under section 206C(9), prior administrative approval of Additional Commissioner of Income-tax/Joint Commissioner of Income-tax shall be obtained in each case. Further, prior administrative approval of Commissioner of Income-tax (TDS) shall be taken where cumulative amount of tax foregone by lesser rate of tax collection at source during the financial year for a particular buyer or licensee or lessee; as the case may be; exceeds Rupees Fifty lakh in Delhi, Mumbai, Chennai, Kolkata, Bangaluru, Hyderabad, Ahmedabad and Pune Stations and Rupees Ten lakh for other stations. Once the Addl. CIT/JCIT or the CIT(TDS), as the case may be, gives administrative approval of the above, a copy of it has to be endorsed to the jurisdictional CIT also.

3. In relation to TCS matters of a buyer or licensee or lessee falling within the jurisdiction of Directorate of Income-tax (International Taxation), the powers indicated above shall be vested in the officers concerned i.e., Range Additional DIT/JDIT (International Taxation) or Director of Income-tax (International Taxation), as the case may be.

4. “Tax foregone” in case of a buyer or licensee or lessee; as the case may be; should ordinarily mean difference between taxes computed at the relevant rate of collection stipulated and the tax computed on the basis of rate at which the certificate under section 206C(9) is sought to be issued.

5. The content of this instruction may be brought to the notice of all officers working in your charge for strict compliance.

1.1-5 CERTIFICATE FOR DEDUCTION AT LOWER RATE – ADVISORY FOR DEDUCTORS

SECTION 197, READ WITH SECTIONS 195, 206C, OF THE INCOME-TAX ACT, 1961 – DEDUCTION OF TAX AT SOURCE 

PRESS RELEASE, DATED 1-1-2016

Advisory for Deductors

1. Deductors deduct tax at lower rate on payment/credit to deductee on production of certificate duly issued by assessing officers under section 197. Deductors quote such certificate number in quarterly TDS statement. Instances of huge default of ‘Short Deduction’ have been observed due to wrong quoting of 197 certificate number. The scenario of wrong 197 certificate generally arises when the deductor accepts from deductee a manually issued lower deduction certificate by assessing officer & quotes the same in TDS statements.

2. CPC(TDS) has provided the facility of validating the 197 certificate to the deductors on www.tdscpc.gov.in (TRACES). This enables a deductor to first validate the 197 certificates given to him by their deductees and then furnish the same in the TDS/TCS statement.

3. If the 197 certificate is not valid as per TRACES validation, the deductor should always insist upon an ITD system generated certificate having a unique 10 digit alpha numeric number. This would minimize the generation of default of “Short Deduction due to 197 certificate”.

4. This also applies to certificates issued under section 195(2) & 195(3) by LTU & international taxation officers.

5. Instruction to field authorities to issue only system generated certificate were issued vide instruction No. 36 through F.No. SW/TDS/2/2/08-DIT(S)-II[Vol.II] dated July 15th, 2009 Annexure-A


TCS Tax Collected at Source Flow chart Diagram

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