Section 206C of Income Tax Act

Section 206C of Income Tax Act. Section 206C of the Income Tax Act, 1961 deals with the collection of tax at source (TCS) on the sale of specified goods and services. It places an obligation on the seller to collect a certain percentage of tax from the buyer at the time of sale and deposit it with the government. This provision aims to ensure tax compliance by monitoring high-value transactions and preventing tax evasion. Section 206C covers a range of goods such as alcohol, tendu leaves, timber, scrap, and minerals, along with certain foreign remittances and vehicle sales, making it vital for businesses to understand and comply.
What is TCS Under Section 206C?
Tax Collected at Source (TCS) under Section 206C of the Income Tax Act, 1961 refers to the tax that certain sellers are required to collect from buyers at the time of sale of specified goods or services. The seller then deposits this collected tax with the government. TCS is applicable to transactions involving goods like alcohol, tendu leaves, timber, scrap, minerals, and also high-value items like motor vehicles exceeding Rs.10 lakhs. It also covers foreign remittances and overseas tour packages. The primary objective of TCS is to track high-value transactions and ensure advance tax collection from buyers. TCS collected is reflected in the buyer’s Form 26AS and can be claimed as credit while filing their income tax return.
Who is Required to Collect TCS?
Tax Collected at Source (TCS) is a tax that certain sellers are required to collect from the buyers at the time of sale of specified goods or services. The provisions for TCS are governed under Section 206C of the Income Tax Act, 1961. The responsibility to collect Tax Collected at Source (TCS) lies with the following types of persons or entities, as mandated under Section 206C of the Income Tax Act:
Central and State Governments
These government bodies must collect TCS when selling specified goods or services, as they are considered sellers under the Income Tax Act, similar to private entities involved in commercial transactions subject to TCS provisions.
Local Authorities
Local governing bodies like municipalities are also treated as sellers when conducting commercial activities, such as selling forest produce or minerals, and are required to collect TCS under the applicable rules of Section 206C.
Statutory Corporations or Authorities
Government-established corporations like State Forest Corporations must collect TCS when selling designated items. They are included due to their commercial functions and public authority status, ensuring tax compliance in state-run business dealings.
Companies Incorporated under the Companies Act
Private and public companies registered under the Companies Act must collect TCS on specified sales if they engage in trading or provision of goods or services outlined under Section 206C, based on transaction value thresholds.
Partnership Firms
Registered firms involved in selling goods like scrap, tendu leaves, or motor vehicles are obligated to collect TCS if the transaction type falls under the purview of Section 206C, irrespective of the size of the firm.
Co-operative Societies
Co-operative societies that sell specified goods or offer listed services under Section 206C must collect TCS from buyers, ensuring tax collection obligations are met even when the selling entity operates on a co-operative business model.
Individuals or Hindu Undivided Families (HUFs)
TCS must be collected by individuals or HUFs only if their turnover exceeds Rs.1 crore for business or Rs.50 lakh for profession in the previous financial year, making them subject to tax audit under Section 44AB.
Applicability of Section 206C
Section 206C of the Income Tax Act mandates the collection of Tax Collected at Source (TCS) on the sale of specified goods and services. It applies to sellers dealing in items like scrap, tendu leaves, timber, forest produce, minerals, and motor vehicles above a specified value. TCS also applies to services such as mining, toll plaza, parking, overseas tour packages, and foreign remittances under the Liberalised Remittance Scheme. Sellers whose turnover exceeds the prescribed threshold in the previous financial year must collect TCS on sales beyond the defined limit to a buyer. TCS is to be collected at the time of debiting the buyer or receiving payment. Exemptions exist for certain entities and declarations under Form 27C. Individuals or HUFs are liable only if covered under tax audit provisions.
When is TCS Applicable?
Tax Collected at Source (TCS) is applicable when a seller of specified goods or services collects tax from the buyer at the time of receipt of payment or at the time of sale, depending on the type of transaction, as governed under Section 206C of the Income Tax Act, 1961. TCS is Applicable in the Following Situations:
Sale of Specified Goods
TCS applies when a seller sells goods like scrap, tendu leaves, timber, coal, minerals, and alcoholic liquor. The tax must be collected at the time of debiting the buyer or receiving payment, whichever is earlier.
Sale of Motor Vehicles Above the Threshold Value
TCS is applicable at the rate of 1% when a motor vehicle is sold above a prescribed threshold value (per transaction basis), regardless of whether the buyer is an individual or a business.
Grant of Lease, License, or Contract
TCS is collected on amounts received from granting licenses or leases for toll plazas, parking lots, mining, or quarrying. The applicable rate is 2%, and collection is based on payment or invoice.
Foreign Remittance and Overseas Tour Packages
TCS applies on foreign remittance under the Liberalized Remittance Scheme (LRS) and on the sale of overseas tour packages. Authorized dealers and tour operators must collect TCS at the time of remittance or sale.
Sale of Goods Exceeding a Threshold (Section 206C(1H))
Applicable when:

The seller's turnover exceeds ten crore in the previous financial year.

The sale to a single buyer exceeds fifty lakh in a financial year.
 TCS is collected on the excess amount at the time of receipt of payment.

Timing of TCS Collection

For most transactions: TCS is collected at the time of debiting the amount to the buyer or at the time of receipt of payment, whichever is earlier.

For Section 206C(1H): TCS is collected at the time of receipt of consideration, not invoicing.

New TCS Provisions for Overseas Remittances & Tour Packages (w.e.f. July 1, 2023)
Under the amended Section 206C(1G) of the Income Tax Act, TCS is applicable on overseas tour packages and foreign remittances. For overseas tour packages, TCS is collected at 5% on the entire amount with no threshold. If PAN/Aadhaar is not provided, the rate increases to 20%. For foreign remittances under LRS, TCS is applicable only if the amount exceeds seven lakh in a financial year. The rate is 0.5% for education via loan, 5% for education/medical (self-funded), and 20% for other purposes. Authorized dealers and tour operators are responsible for collecting TCS at the time of payment or remittance. TCS credit can be claimed in the taxpayer's ITR.
Exemptions from TCS (Tax Collected at Source)
TCS is not applicable in certain cases as per the Income Tax Act. Firstly, if the buyer is the Central or State Government, an embassy, a High Commission, local authority, or RBI, TCS is exempt. Secondly, export of goods is outside the scope of TCS provisions. Also, if the buyer deducts TDS on the same transaction, TCS is not required. Another exemption applies when the buyer furnishes Form 27C, declaring that goods are for manufacturing, processing, or production and not for trading. Lastly, small sellers with turnover not exceeding the prescribed threshold (e.g., ten crore under Section 206C(1H)) in the previous financial year are not liable to collect TCS.
TCS Return Filing – Section 206C(3)
Under Section 206C(3) of the Income Tax Act, every person who collects Tax Collected at Source (TCS) is required to file a quarterly TCS return in Form 27EQ. This return must include details of TCS collected, the Permanent Account Number (PAN) of buyers, rate and nature of collection, and the amount paid to the government. The due dates for filing are the 15th of the month following the end of each quarter, except for the last quarter (due by May 15). Non-filing or late filing attracts penalties under Section 271H. Additionally, the collector must issue a TCS certificate in Form 27D to the buyer within 15 days from the due date of filing Form 27EQ, ensuring transparency and enabling buyers to claim credit.
TCS Certificate – Form 27D
Form 27D is the certificate issued under Section 206C of the Income Tax Act by the seller or collector of Tax Collected at Source (TCS) to the buyer. It serves as proof that TCS has been collected and deposited with the government. The certificate contains essential details such as the name and PAN of both parties, nature of the goods sold, amount collected, and the TCS rate. It must be issued within 15 days from the due date of filing the quarterly TCS return in Form 27EQ. Form 27D enables the buyer to claim TCS as a tax credit in their income tax return. Delay or failure to issue the certificate may attract penalties.
Penalty and Prosecution for Non-Compliance of TCS Provisions
Failure to comply with TCS provisions under the Income Tax Act can lead to monetary penalties and prosecution, depending on the nature and severity of the default.
Penalties

Failure to Collect TCS [Section 206C(6A)]: If a seller fails to collect TCS, they must deposit the uncollected amount themselves along with interest at 1% per month or part thereof from the due date until payment, as mandated under the Income Tax Act for TCS defaults.

Late or Non-Filing of TCS Return [Section 271H]: Failure to file the quarterly TCS return in Form 27EQ by the due date attracts a penalty between Rs.10,000 and Rs.1,00,000. This applies even if the TCS was collected and paid, stressing the importance of timely compliance and accurate reporting to tax authorities.

Failure to Issue TCS Certificate [Section 272A(2)(g)]: If the TCS certificate (Form 27D) is not issued within 15 days of the return due date, a penalty of Rs.100 per day of default is levied, capped at the total TCS amount. This ensures transparency and allows the buyer to claim TCS credit.

Prosecution for Non-Deposit of TCS [Section 276BB]
When TCS is collected but not deposited to the government, it becomes a prosecutable offence. The collector may face rigorous imprisonment from 3 months to 7 years along with a fine. This provision highlights the seriousness of fund misappropriation by the collecting person. 
Section 206CCA – Higher TCS for Non-Filers
Section 206CCA of the Income Tax Act mandates higher TCS rates for specified persons who have not filed their income tax returns for the last two financial years. It applies when the due date for filing ITR under Section 139(1) has expired and the total TDS or TCS in each of those two years is Rs.50,000 or more. In such cases, the person responsible for collecting TCS must do so at a higher rate. The applicable rate is the higher of twice the prescribed TCS rate or 5%. This provision is designed to promote tax compliance by penalizing habitual non-filers. However, it does not apply to non-residents without a permanent establishment in India. For example, if the standard TCS rate is 0.1%, and the buyer is a non-filer, then TCS must be collected at 5%. Collectors must verify the filing status of buyers before collecting TCS to ensure proper compliance.
Conclusion
Section 206C of the Income Tax Act plays a vital role in ensuring tax collection at the point of sale for specified goods and services. It promotes transparency, widens the tax base, and helps the government track high-value transactions more effectively. With the introduction of sub-sections like 206C(1H) for sale of goods and 206C(1G) for foreign remittances and tour packages, the scope of TCS has significantly expanded. Provisions such as higher TCS for non-filers under Section 206CCA further enhance compliance. However, sellers must maintain accurate records, monitor buyer-wise thresholds, and ensure timely return filing and certificate issuance to avoid penalties and prosecution. Proper understanding and implementation of Section 206C not only safeguard businesses from legal consequences but also contribute to national revenue collection. As TCS provisions evolve, regular updates and professional guidance become essential for continued compliance.
If you have any queries regarding Company Registration, Trademark Registration, Business License for any products, then you can connect with Compliance Calendar LLP experts through email info@ccoffice.in or Call/Whatsapp at +91 9988424211.
FAQs
Q1. What is Section 206C of the Income Tax Act?
Ans. Section 206C deals with the collection of Tax at Source (TCS) by sellers of specified goods or services from the buyers. It ensures that tax is collected at the point of sale to widen the tax base and improve compliance.
Q2. Who is required to collect TCS under Section 206C?
Ans. TCS must be collected by sellers such as companies, firms, co-operative societies, and individuals or HUFs (subject to tax audit) selling goods like scrap, alcohol, tendu leaves, minerals, and motor vehicles, or providing specified services.
Q3. When is TCS applicable on sale of goods under Section 206C(1H)?
Ans. TCS applies if the seller’s turnover exceeds ten crore in the previous financial year and the value of sales to a buyer exceeds fifty lakh in the current financial year. TCS is collected on the amount exceeding fifty lakh.
Q4. At what rate is TCS collected under Section 206C?
Ans. Rates vary depending on the nature of goods or services. For example, scrap attracts 1%, tendu leaves 5%, motor vehicles above a threshold attract 1%, and sale of goods above fifty lakh (206C(1H)) attracts 0.1%.
Q5. Is TCS applicable on exports and services?
Ans. No, TCS under Section 206C(1H) is not applicable on exports or services. It applies only to the domestic sale of goods, provided other conditions like turnover and sale thresholds are met.
Q6. What happens if TCS is not collected or deposited?
Ans. Failure to collect or deposit TCS attracts interest under Section 206C(7), penalties under Sections 271H and 272A, and even prosecution under Section 276BB if the collected amount is not paid to the government.
Q7. What is Form 27EQ and who is required to file it?
Ans. Form 27EQ is the quarterly TCS return that must be filed by every person or entity collecting tax under Section 206C. It contains details of TCS collected and deposited and must be submitted by the 15th of the month following each quarter.
Q8. What is Form 27D in TCS compliance?
Ans. Form 27D is the TCS certificate issued by the collector to the buyer, confirming the amount of TCS collected and deposited. It must be issued within 15 days from the due date of filing Form 27EQ to help buyers claim credit in their ITR.
Q9. Are there any exemptions from TCS under Section 206C?
Ans. Yes, TCS is not applicable when the buyer is the Central/State Government, an embassy, RBI, or local authority. It is also exempt when Form 27C is submitted for purchases meant for manufacturing, processing, or production—not trading.
Q10. What is the impact of Section 206CCA on TCS?
Ans. Section 206CCA mandates a higher TCS rate for buyers who have not filed ITRs for the last two financial years and where TDS/TCS was Rs.50,000 or more in each year. The rate increases to either twice the prescribed rate or 5%, whichever is higher.

Section 206C of the Income Tax Act, 1961 deals with the collection of tax at source (TCS) on the sale of specified goods and services. It places an obligation on the seller to collect a certain percentage of tax from the buyer at the time of sale and deposit it with the government. This provision aims to ensure tax compliance by monitoring high-value transactions and preventing tax evasion. Section 206C covers a range of goods such as alcohol, tendu leaves, timber, scrap, and minerals, along with certain foreign remittances and vehicle sales, making it vital for businesses to understand and comply.

What is TCS Under Section 206C?

Tax Collected at Source (TCS) under Section 206C of the Income Tax Act, 1961 refers to the tax that certain sellers are required to collect from buyers at the time of sale of specified goods or services. The seller then deposits this collected tax with the government. TCS is applicable to transactions involving goods like alcohol, tendu leaves, timber, scrap, minerals, and also high-value items like motor vehicles exceeding Rs.10 lakhs. It also covers foreign remittances and overseas tour packages. The primary objective of TCS is to track high-value transactions and ensure advance tax collection from buyers. TCS collected is reflected in the buyer’s Form 26AS and can be claimed as credit while filing their income tax return.

Who is Required to Collect TCS?

Tax Collected at Source (TCS) is a tax that certain sellers are required to collect from the buyers at the time of sale of specified goods or services. The provisions for TCS are governed under Section 206C of the Income Tax Act, 1961. The responsibility to collect Tax Collected at Source (TCS) lies with the following types of persons or entities, as mandated under Section 206C of the Income Tax Act:

Central and State Governments

These government bodies must collect TCS when selling specified goods or services, as they are considered sellers under the Income Tax Act, similar to private entities involved in commercial transactions subject to TCS provisions.

Local Authorities

Local governing bodies like municipalities are also treated as sellers when conducting commercial activities, such as selling forest produce or minerals, and are required to collect TCS under the applicable rules of Section 206C.

Statutory Corporations or Authorities

Government-established corporations like State Forest Corporations must collect TCS when selling designated items. They are included due to their commercial functions and public authority status, ensuring tax compliance in state-run business dealings.

Companies Incorporated under the Companies Act

Private and public companies registered under the Companies Act must collect TCS on specified sales if they engage in trading or provision of goods or services outlined under Section 206C, based on transaction value thresholds.

Partnership Firms

Registered firms involved in selling goods like scrap, tendu leaves, or motor vehicles are obligated to collect TCS if the transaction type falls under the purview of Section 206C, irrespective of the size of the firm.

Co-operative Societies

Co-operative societies that sell specified goods or offer listed services under Section 206C must collect TCS from buyers, ensuring tax collection obligations are met even when the selling entity operates on a co-operative business model.

Individuals or Hindu Undivided Families (HUFs)

TCS must be collected by individuals or HUFs only if their turnover exceeds Rs.1 crore for business or Rs.50 lakh for profession in the previous financial year, making them subject to tax audit under Section 44AB.

Applicability of Section 206C

Section 206C of the Income Tax Act mandates the collection of Tax Collected at Source (TCS) on the sale of specified goods and services. It applies to sellers dealing in items like scrap, tendu leaves, timber, forest produce, minerals, and motor vehicles above a specified value. TCS also applies to services such as mining, toll plaza, parking, overseas tour packages, and foreign remittances under the Liberalised Remittance Scheme. Sellers whose turnover exceeds the prescribed threshold in the previous financial year must collect TCS on sales beyond the defined limit to a buyer. TCS is to be collected at the time of debiting the buyer or receiving payment. Exemptions exist for certain entities and declarations under Form 27C. Individuals or HUFs are liable only if covered under tax audit provisions.

When is TCS Applicable?

Tax Collected at Source (TCS) is applicable when a seller of specified goods or services collects tax from the buyer at the time of receipt of payment or at the time of sale, depending on the type of transaction, as governed under Section 206C of the Income Tax Act, 1961. TCS is Applicable in the Following Situations:

Sale of Specified Goods

TCS applies when a seller sells goods like scrap, tendu leaves, timber, coal, minerals, and alcoholic liquor. The tax must be collected at the time of debiting the buyer or receiving payment, whichever is earlier.

Sale of Motor Vehicles Above the Threshold Value

TCS is applicable at the rate of 1% when a motor vehicle is sold above a prescribed threshold value (per transaction basis), regardless of whether the buyer is an individual or a business.

Grant of Lease, License, or Contract

TCS is collected on amounts received from granting licenses or leases for toll plazas, parking lots, mining, or quarrying. The applicable rate is 2%, and collection is based on payment or invoice.

Foreign Remittance and Overseas Tour Packages

TCS applies on foreign remittance under the Liberalized Remittance Scheme (LRS) and on the sale of overseas tour packages. Authorized dealers and tour operators must collect TCS at the time of remittance or sale.

Sale of Goods Exceeding a Threshold (Section 206C(1H))

Applicable when:

The seller's turnover exceeds ten crore in the previous financial year.
The sale to a single buyer exceeds fifty lakh in a financial year.

TCS is collected on the excess amount at the time of receipt of payment.

Timing of TCS Collection

For most transactions: TCS is collected at the time of debiting the amount to the buyer or at the time of receipt of payment, whichever is earlier.
For Section 206C(1H): TCS is collected at the time of receipt of consideration, not invoicing.

New TCS Provisions for Overseas Remittances & Tour Packages (w.e.f. July 1, 2023)

Under the amended Section 206C(1G) of the Income Tax Act, TCS is applicable on overseas tour packages and foreign remittances. For overseas tour packages, TCS is collected at 5% on the entire amount with no threshold. If PAN/Aadhaar is not provided, the rate increases to 20%. For foreign remittances under LRS, TCS is applicable only if the amount exceeds seven lakh in a financial year. The rate is 0.5% for education via loan, 5% for education/medical (self-funded), and 20% for other purposes. Authorized dealers and tour operators are responsible for collecting TCS at the time of payment or remittance. TCS credit can be claimed in the taxpayer's ITR.

Exemptions from TCS (Tax Collected at Source)

TCS is not applicable in certain cases as per the Income Tax Act. Firstly, if the buyer is the Central or State Government, an embassy, a High Commission, local authority, or RBI, TCS is exempt. Secondly, export of goods is outside the scope of TCS provisions. Also, if the buyer deducts TDS on the same transaction, TCS is not required. Another exemption applies when the buyer furnishes Form 27C, declaring that goods are for manufacturing, processing, or production and not for trading. Lastly, small sellers with turnover not exceeding the prescribed threshold (e.g., ten crore under Section 206C(1H)) in the previous financial year are not liable to collect TCS.

TCS Return Filing – Section 206C(3)

Under Section 206C(3) of the Income Tax Act, every person who collects Tax Collected at Source (TCS) is required to file a quarterly TCS return in Form 27EQ. This return must include details of TCS collected, the Permanent Account Number (PAN) of buyers, rate and nature of collection, and the amount paid to the government. The due dates for filing are the 15th of the month following the end of each quarter, except for the last quarter (due by May 15). Non-filing or late filing attracts penalties under Section 271H. Additionally, the collector must issue a TCS certificate in Form 27D to the buyer within 15 days from the due date of filing Form 27EQ, ensuring transparency and enabling buyers to claim credit.

TCS Certificate – Form 27D

Form 27D is the certificate issued under Section 206C of the Income Tax Act by the seller or collector of Tax Collected at Source (TCS) to the buyer. It serves as proof that TCS has been collected and deposited with the government. The certificate contains essential details such as the name and PAN of both parties, nature of the goods sold, amount collected, and the TCS rate. It must be issued within 15 days from the due date of filing the quarterly TCS return in Form 27EQ. Form 27D enables the buyer to claim TCS as a tax credit in their income tax return. Delay or failure to issue the certificate may attract penalties.

Penalty and Prosecution for Non-Compliance of TCS Provisions

Failure to comply with TCS provisions under the Income Tax Act can lead to monetary penalties and prosecution, depending on the nature and severity of the default.

Penalties

Failure to Collect TCS [Section 206C(6A)]: If a seller fails to collect TCS, they must deposit the uncollected amount themselves along with interest at 1% per month or part thereof from the due date until payment, as mandated under the Income Tax Act for TCS defaults.
Late or Non-Filing of TCS Return [Section 271H]: Failure to file the quarterly TCS return in Form 27EQ by the due date attracts a penalty between Rs.10,000 and Rs.1,00,000. This applies even if the TCS was collected and paid, stressing the importance of timely compliance and accurate reporting to tax authorities.
Failure to Issue TCS Certificate [Section 272A(2)(g)]: If the TCS certificate (Form 27D) is not issued within 15 days of the return due date, a penalty of Rs.100 per day of default is levied, capped at the total TCS amount. This ensures transparency and allows the buyer to claim TCS credit.

Prosecution for Non-Deposit of TCS [Section 276BB]

When TCS is collected but not deposited to the government, it becomes a prosecutable offence. The collector may face rigorous imprisonment from 3 months to 7 years along with a fine. This provision highlights the seriousness of fund misappropriation by the collecting person.

Section 206CCA – Higher TCS for Non-Filers

Section 206CCA of the Income Tax Act mandates higher TCS rates for specified persons who have not filed their income tax returns for the last two financial years. It applies when the due date for filing ITR under Section 139(1) has expired and the total TDS or TCS in each of those two years is Rs.50,000 or more. In such cases, the person responsible for collecting TCS must do so at a higher rate. The applicable rate is the higher of twice the prescribed TCS rate or 5%. This provision is designed to promote tax compliance by penalizing habitual non-filers. However, it does not apply to non-residents without a permanent establishment in India. For example, if the standard TCS rate is 0.1%, and the buyer is a non-filer, then TCS must be collected at 5%. Collectors must verify the filing status of buyers before collecting TCS to ensure proper compliance.

Conclusion

Section 206C of the Income Tax Act plays a vital role in ensuring tax collection at the point of sale for specified goods and services. It promotes transparency, widens the tax base, and helps the government track high-value transactions more effectively. With the introduction of sub-sections like 206C(1H) for sale of goods and 206C(1G) for foreign remittances and tour packages, the scope of TCS has significantly expanded. Provisions such as higher TCS for non-filers under Section 206CCA further enhance compliance. However, sellers must maintain accurate records, monitor buyer-wise thresholds, and ensure timely return filing and certificate issuance to avoid penalties and prosecution. Proper understanding and implementation of Section 206C not only safeguard businesses from legal consequences but also contribute to national revenue collection. As TCS provisions evolve, regular updates and professional guidance become essential for continued compliance.

If you have any queries regarding Company Registration, Trademark Registration, Business License for any products, then you can connect with Compliance Calendar LLP experts through email info@ccoffice.in or Call/Whatsapp at +91 9988424211.

FAQs

Q1. What is Section 206C of the Income Tax Act?

Ans. Section 206C deals with the collection of Tax at Source (TCS) by sellers of specified goods or services from the buyers. It ensures that tax is collected at the point of sale to widen the tax base and improve compliance.

Q2. Who is required to collect TCS under Section 206C?

Ans. TCS must be collected by sellers such as companies, firms, co-operative societies, and individuals or HUFs (subject to tax audit) selling goods like scrap, alcohol, tendu leaves, minerals, and motor vehicles, or providing specified services.

Q3. When is TCS applicable on sale of goods under Section 206C(1H)?

Ans. TCS applies if the seller’s turnover exceeds ten crore in the previous financial year and the value of sales to a buyer exceeds fifty lakh in the current financial year. TCS is collected on the amount exceeding fifty lakh.

Q4. At what rate is TCS collected under Section 206C?

Ans. Rates vary depending on the nature of goods or services. For example, scrap attracts 1%, tendu leaves 5%, motor vehicles above a threshold attract 1%, and sale of goods above fifty lakh (206C(1H)) attracts 0.1%.

Q5. Is TCS applicable on exports and services?

Ans. No, TCS under Section 206C(1H) is not applicable on exports or services. It applies only to the domestic sale of goods, provided other conditions like turnover and sale thresholds are met.

Q6. What happens if TCS is not collected or deposited?

Ans. Failure to collect or deposit TCS attracts interest under Section 206C(7), penalties under Sections 271H and 272A, and even prosecution under Section 276BB if the collected amount is not paid to the government.

Q7. What is Form 27EQ and who is required to file it?

Ans. Form 27EQ is the quarterly TCS return that must be filed by every person or entity collecting tax under Section 206C. It contains details of TCS collected and deposited and must be submitted by the 15th of the month following each quarter.

Q8. What is Form 27D in TCS compliance?

Ans. Form 27D is the TCS certificate issued by the collector to the buyer, confirming the amount of TCS collected and deposited. It must be issued within 15 days from the due date of filing Form 27EQ to help buyers claim credit in their ITR.

Q9. Are there any exemptions from TCS under Section 206C?

Ans. Yes, TCS is not applicable when the buyer is the Central/State Government, an embassy, RBI, or local authority. It is also exempt when Form 27C is submitted for purchases meant for manufacturing, processing, or production—not trading.

Q10. What is the impact of Section 206CCA on TCS?

Ans. Section 206CCA mandates a higher TCS rate for buyers who have not filed ITRs for the last two financial years and where TDS/TCS was Rs.50,000 or more in each year. The rate increases to either twice the prescribed rate or 5%, whichever is higher.