Section 206-C in the Income Tax Act (1961)
Section 206C of the Indian Income Tax Act explains everything about Tax Collection at Source (TCS); a means to collect tax just like TDS. But of course there are some key differences between TCS and TDS. While TDS is made when the money is disbursed while TCS is collected when the seller has to shell out more money than initially agreed for certain transactions. TCS charge, as said, is on the seller.
According to the Section 206C, the tax at source will be collected the account is debited or when the receipt is issued, whichever happens earlier. It can be paid as cash, DD or cheque. Any seller of such classified products should collect tax at source from customer at the agreed rate.
Any individual, who is a seller, at the time of taking the money owed by the consumer to his (consumer's) account or at the time of receiving that money from the customer in cash/ cheque or demand draft shall collect the percentage of amount as mentioned in the table given below.
SL No | Kind of Goods/ Services | Percentage Levied |
1 | Consumable Alcohol/ liquor (not counting overseas brand made in India) | 1 Percent |
2 | Timber wood acquired using a valid forest lease | 2.5 Percent |
3 | Timber wood acquired by other means except a forest least | 2.5 Percent |
4 | Any other forest goods other than timber | 2.5 Percent |
5 | Tendu leaves | 5 Percent |
6 | Any other goods from forest other than tendu leaves | 2.5 Percent |
7 | Minerals (such as ores of iron, coal or lignite) | 1 Percent |
8 | Scrap | 1 Percent |
On condition that all sellers starting from 1st June 2003 until the day before Taxation Laws were amended in the same year, debiting of the money owed by the customer to the account of the customer or of receiving of the same from the customer in hard cash, by cheque or demand draft, shall collect customers.
Tax shall not be collected in the event of a customer (only for resident Indians) if the customer provides a self-attested declaration in duplicate in the form available and certified in the recommended manner to the official accountable for accruing tax. This is applicable only for the purposes of manufacturing, processing or generating artifacts or items and strictly forbidden for trading purposes.
The officer liable for tax collection as mentioned in this section should submit a copy of the statement stipulated in subdivision (1A) by the seventh day of the month after the declaration is made to the Principal Chief Commissioner/ Principal Commissioner/ Chief Commissioner/ Commissioner (mentioned in (1B)). As for sub-section (1C), everyone who allows a lease/ contract/ license to an applicant or other than any government firm/ undertaking to use a toll plaza or a parking lot or excavation site or mine for any trading purpose shall debit from the licensee of any such lease/ contract/ license.
SL No | Kind of Agreement/ Lease/ License | Percentage Levied |
1 | Parking area | 2 Percent |
2 | Toll plaza | 2 Percent |
3 | Excavation/ Mining/ quarrying (not including that of mineral oil such as natural gas or petroleum) | 2 Percent |
Buyer is defined as an individual who acquires in any trade, by way of public sale, tender or any other means, products/ services of the nature detailed in the tables or the right to obtain any merchandises. Buyer should not be from any Public Sector Corporation, Union or State Governments undertaking, embassy, high command, legation, consulate, commission and the trade representation of an overseas state/ club/ organization. One cannot be termed as a buyer if the retail gods are bought for individual use.
An individual who trades Jewellery or precious metals like gold, silver etc. are also responsible for TCS. According to the Section 206C-(1D), every seller who gets any sum in cash as consideration for sale of these articles (not including any gold coin or article with less than 10g weight). If the sale consideration is less than INR 2 lacs for bullion, TCS is not required. And for Jewellery, there is no need for TCS if the same amount is less than INR 5 lacs.
Explanations:
Jewellery: Ornaments fashioned from silver, gold, platinum or any listed precious metal or alloy with one or more of the aforementioned precious metals can be termed as Jewellery. Same applies even it is attached any wearing attire.
Scrap: Scrap is a term to categorize any waste material formed as a result of manufacturing. They can be useless by products too due to rupture, wear and tear and any kind of damage during production. Scrap which is not formed this way is not eligible for Tax Collection at Source.
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