TCS-Section 206C – Complete Guide

By | October 10, 2016

COLLECTION OF TAX AT SOURCE [SECTION 206C]

Applicability of section  206C [Tax Collected at Source]

For applicability of section 206C following conditions should be satisfied, namely :—

  • The assessee is a ‘buyer’ of ‘specific goods’ in any sale, by way of auction, tender or any other mode; or, he is a lessee or licensee in relation to ‘specified contracts’ [The terms ‘licensee or lessee’ does not include a public sector company.]
  • Buyer:- The term ‘buyer’ stated in conditions above does not include the following :
    • A public sector company, Central Government, a State Government, an Embassy, a High Commission, legation, commission, consulate, trade representation of a foreign State.
    • A club.
    • A buyer in the retail sale of such goods purchased by him for personal consumption.
  • Specific goods are :
    • (i) Alcoholic Liquor for human consumption/Indian made foreign liquor, or
    • (ii) tendu leaves, or
    • (iii) timber, or
    • (iv) any forest produce, or
    • (v) scrap, or
    • (vi) minerals (coal or lignite or iron ore)
  • Specified contracts are :
    • (i) Parking lot,
    • (ii) Toll plaza and
    • (iii) Mining or Quarrying
  • Sale is conducted by any of the following persons, namely :
    • (i) Central Government,
    • (ii) State Government,
    • (iii) Local authority,
    • (iv) Statutory corporation,
    • (v) Authority established by or under a Central, State or Provincial Act,
    • (vi) Company,
    • (vii) Firm,
    • (viii) Co-operative society, or
    • (ix) an individual or a Hindu undivided family whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB during the financial year imme-diately preceding the financial year in which the goods of the nature specified in section 206C are sold.
  • Sale of bullion/jewellery or any other goods/services will be subject to TCS provisions, if the following conditions are satisfied –
    1. Sale consideration of bullion exceeds Rs. 2,00,000; or
    2. Sale consideration of jewellery exceeds Rs. 5,00,000; or
    3. sale consideration of any other goods or any service exceeding Rs. 2,00,000.[ w.e.f. 1-6-2016]

Out of sale consideration any amount is received in cash.

If the above conditions are satisfied, the seller will collect tax at the rate of 1 per cent of sale consideration. Tax will be collected at the time of receipt of any amount in cash. This rule will be applicable irrespective of the fact whether the buyer is a manufacturer, trader or the purchase is for personal use. However, with effect from 1-6-2016 no tax is to collected at source on any amount on which tax has been deducted at source by the payer under Chapter XVII-B. Also, nothing contained in relation to sale of any goods (other than bullion or jewellery) or providing any service shall apply to such class of buyers who fulfil such conditions, as may be prescribed.

Also Read TCS on cash sale of goods or services > Rs 2 Lakh wef 1.6.16

  • Motor Vehicle – (W.e.f. 1-6-2016) Every person (being a seller who receives any amount as consideration for sale of motor vehicle of value exceeding Rs. 10,00,000) shall collect the tax at the rate of 1 per cent of sale consideration. This will be applicable whether payment is made by the purchaser in cash or by the issue of a cheque or draft or by any other mode. Also Read TCS on Sale of motor Vehicle above Rs 10 Lakh w.e.f 01.06.2016


Who is responsible to collect tax at source under Section 206C

Seller, lessor or licensor is to collect tax at source if conditions specified above are satisfied.

When tax has to be collected at source under Section 206C

Tax has to be collected by the seller, lessor or licensor at the time of debiting of the amount payable by the buyer, licensee or lessee to the account of the buyer, licensee or lessee or at the time of receipt of such amount from the buyer, licensee or lessee in cash or by issue of cheque/draft or by any other mode, whichever is earlier.

Time of deposit of TCS under Section 206C

When collection is made on behalf of Government

(a) on the same day where tax is so paid without production of income-tax challan and

(b) on or before 7 days from end of month in which collection is made, where tax is paid accompanied by an income-tax challan.

In other cases

Within one week from last day of month in which collection is made

TCS Return filing after deposit of TCS under Section 206C

in Prescribed Statement 

Person collecting the tax shall, after depositing the tax, prepare and file quarterly statements in Form 27EQ with the Director General of Income-tax (Systems) or the person authorized by him (NSDL). Form 27EQ is to be furnished as under :

Sl. No. Quarter of the financial year ended Due date
(1) (2) (3)
1. 30th June 15th July of the financial year
2. 30th September 15th October of the financial year
3. 31st December 15th January of the financial year
4. 31st March 15th May of the financial year immediately following the financial year in which collection is made.

i) The statement may be furnished in any of the following manners, namely:

a) furnishing the statement in paper form

b) Furnishing the statement electronically under digital signature in accordance with the procedures, formats and standards prescribed by the Director General of Income-tax (Systems)

c) Furnishing the statement electronically along with the verification of the statement in Form 27A or verified through an electronic process in accordance with the procedures, formats and standards prescribed by the Director General of Income-tax (Systems).

(ii)   Where,—

(a) the collector is an office of the Government; or

(b) the collector is the principal officer of a company; or

(c) the collector is a person who is required to get his accounts audited under section 44AB in the immediately preceding financial year;

(d) the number of collectee’s records in a statement for any quarter of the financial year are twenty or more,

the collector shall furnish the statement in the manner specified in (i)(b) or (i)(c) above.

(iii) Where the collector is a person other than the person referred to in (ii), the statement may, at his option, be delivered or cause to be delivered in the manner specified in (i)(b) or (i)(c) above.

(iv) Statement shall include a correction statement.

At the time of preparing the statement in Form 27EQ the collector shall

(a) quote his TAN in the statement,

(b) quote his PAN in the statement except where the collector is an office of the Government,

(c) quote the PAN of all collectees,

(d) furnish particulars of the tax paid to the Central Government including book identification number or challan identification number, as the case may be and

(e) furnish particulars of amount received or debited on which tax was not collected in view of the furnishing of declaration under sub-section (1A) of section 206C by the buyer.

Issue of certificate after filing of TCS Return 

Issue certificate in Form 27D

Sl. No. Quarter of the financial year ended Due date
(1) (2) (3)
1. 30th June 30th July of the financial year
2. 30th September 30th October of the financial year
3. 31st December 30th January of the financial year
4. 31st March 30th May of the financial year immediately following the financial year in which collection is made.

If original Form 27D issued has been lost and collectee requests for issue of a duplicate certificate, a duplicate may be issued and such certificate should be certified as duplicate.

The certificate shall specify:—

(a)          valid permanent account number (PAN) of the collectee;

(b)          valid tax deduction and collection account number (TAN) of the collector;

(c)          (i) book identification number or numbers where deposit of tax collected is without production of challan in case of an office of the Government;

               (ii) challan identification number or numbers in case of payment through bank;

(d)          receipt number of the relevant quarterly statement of tax collected at source.

Credit for TCS collected under Section 206C

Credit for tax collected and deposited shall be given to the person from whom tax has been collected on the basis of information relating to TCS furnished by the person responsible for collection of tax to the income-tax authority.

Credit for TCS shall be given for the assessment year for which such income is assessable. Where the lease or licence is relatable to more than one year, credit for TCS shall be allowed across those years to which the lease or license relates in the same proportion

Annual statement of tax collected or paid 

The prescribed income-tax authority or the person authorised by such authority referred to in second proviso to sub-section (5) of section 206C shall deliver to the buyer referred to in sub-section (1) or, as the case may be, to the licencee or lessee referred to in sub-section (1C) of section 206C from whom the amount has been collected, or to every person in respect of whose income the tax has been paid, a statement in Form No. 26AS by 31st July following the financial year during which taxes were collected or paid.

No collection of tax at source/ collection at lower rate

 No tax shall be collected at source if the buyer, licensee or lessee gives a declaration (in duplicate) to the effect that the specified goods will be utilised for the purposes of manufacturing, processing or producing articles or things or for purpose of generation of power and not for trading purposes; the declaration should be in Form No. 27C.

The person collecting tax shall deliver to the Chief Commissioner or Commissioner one copy of the said declaration before the 7th day of the month next following the month in which the declaration is furnished.

 Buyer/Licensee/Lessee may apply to AO in Form No. 13.

 

 

 

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