Tax Collected at Source (TCS) is a tax mechanism in India where the seller collects tax from the buyer at the time of sale for specific goods and transactions. Key aspects of TCS include:
Definition and Purpose
- TCS is levied by the seller on the buyer during a sale transaction
- The seller collects this tax from the buyer and remits it to the government
- It allows the Indian government to collect income tax revenue directly at the source of the transaction
Applicability
- Applies only to specific goods and transactions as outlined in Section 206C of the Income Tax Act
- Certain entities are designated as sellers authorized to collect TCS, including companies, partnerships, and government bodies
- Buyers are generally obligated to pay TCS, with some exceptions like embassies and government entities
Key Features
- Current TCS limit: Up to USD 250,000 per financial year for permissible transactions under the Liberalized Remittance Scheme (LRS)
- TCS rates vary based on the type of transaction and amount
- For LRS transactions exceeding ₹7 lakh in a financial year:
- 5% TCS for education or medical purposes
- 20% TCS for other purposes (effective from October 1, 2023)
Differences from TDS
- TCS is collected at the point of sale, while TDS (Tax Deducted at Source) is deducted at the time of payment
- TCS is collected by the seller, while TDS is deducted by the payer
Compliance and Reporting
- Sellers must collect and remit TCS to the government by specified deadlines
- Buyers can claim a refund of TCS by filing their income tax return if their income falls below the tax exemption threshold
TCS serves as an important tool for tax collection and compliance in India, particularly for specific types of transactions and international remittances.