Tax collected at source 2023: Confused about the TCS, here is the only thread you will need to know all about Tax Collected on Source. TCS is applicable on various transactions such as the sale of certain goods like scrap, minerals, timber, etc., or the provision of certain services like professional fees, hotel accommodation charges, etc. The rates and thresholds for TCS vary depending on the nature of the transaction.
what is tax collected at source?
TCS stands for Tax Collected at Source. In India, TCS is a tax collection mechanism where the collector of specified goods or services collects tax from the buyer at the time of sale. The collected tax is then deposited with the government on behalf of the buyer.
The TCS amount collected by the seller is reflected in the buyer’s Form 26AS, which serves as a statement of tax credits. The buyer can claim credit for the TCS amount while filing their income tax return.
The TCS rates and thresholds vary depending on the nature of the transaction. The seller is responsible for collecting TCS and issuing a TCS certificate to the buyer as proof of tax collection. The buyer can then claim credit for the TCS amount while filing their income tax return.
Is tax collected at source refundable?
Yes, tax collected at source (TCS) is generally refundable under certain circumstances. If a person has paid TCS but is not liable to pay the corresponding income tax on that transaction, they can claim a refund for the TCS amount while filing their income tax return.
To claim a refund of TCS, the taxpayer needs to report the TCS amount in their income tax return and calculate their final tax liability after considering all applicable deductions, exemptions, and credits. If the tax liability is lower than the TCS amount, the excess TCS paid can be claimed as a refund.
It’s important to note that the process for claiming a TCS refund may vary depending on the specific circumstances and applicable tax laws. It is advisable to consult a tax professional or refer to the latest tax regulations for accurate guidance on claiming TCS refunds in India.
TCS is your money and it is refundable and can be claimed while filing ITR.
Know where TCS is not Applicable
- Payments for education and medical purposes
- On payments less than ₹ 7 lakh
- TCS is not applicable on Business or Company trip
- Payments for the purchase of foreign goods or services from India
Source of Basic Income: My Gov
Know where TCS Applicable
- Gifts sent to non-residents
- Applicable on assets of high net-worth individuals
- Also applicable to buying property, shares, and foreign travel
How tax collected at source work?
Tax Collected at Source (TCS) is a tax collection mechanism implemented by the Indian government. Under TCS, the collector or seller of specified goods or services collects tax from the buyer at the time of sale or provision of the goods or services. Here’s how the TCS process typically works:
1. Identification of Transactions
The government identifies specific transactions on which TCS is applicable. These may include transactions like the sale of motor vehicles, sale of scrap, sale of minerals, foreign remittances, sale of goods by e-commerce operators, etc.
2. Collection of Tax
The seller or collector, as per the TCS provisions, collects tax from the buyer at the time of sale or receipt of the goods or services. The tax is collected as a percentage of the transaction value.
3. TCS Certificate
After collecting the tax, the seller or collector issues a TCS certificate to the buyer. The certificate serves as proof of tax collection and includes details such as the TCS amount, the buyer’s details, the seller’s details, and the nature of the transaction.
4. Deposit of Tax
The seller or collector is responsible for depositing the collected TCS amount with the government within the prescribed timelines. This amount is deposited with the relevant tax authority.
5. Reporting and Compliance
The seller or collector is required to report the TCS transactions and details to the tax authorities periodically. This includes filing TCS returns and providing necessary information such as TCS certificates issued, transaction values, tax collected, etc.
6. TCS Credit for Buyers
The buyer can claim credit for the TCS amount while filing their income tax return. The TCS amount is reflected in the buyer’s Form 26AS, which serves as a statement of tax credits.
7. Adjustments and Refunds
The TCS amount collected from the buyer is adjusted against their final tax liability. If the tax liability is lower than the TCS amount, the excess TCS paid can be claimed as a refund. The buyer can claim the refund while filing their income tax return.
What is the purpose of tax collected at source?
The purpose of Tax Collected at Source (TCS) is to facilitate the collection of tax at the source of income itself, ensuring that tax compliance is enhanced and revenue leakage is minimized and preventing money laundering in India.
The purposes of TCS in India are as follows-
Tracking High-Value Transactions
TCS helps in tracking high-value transactions and provides valuable data to tax authorities. By collecting tax on such transactions, the government can monitor and analyze economic activities, identify potential tax evasion, and conduct effective tax audits.
Tax Collected at Source acts as a mechanism to ensure tax compliance by making the collector or seller responsible for collecting and depositing the tax. It places an obligation on the collector to collect tax from the buyer and remit it to the government, thereby reducing the chances of tax evasion.
How to claim tax collected at source?
To claim Tax Collected at Source (TCS) in India, follow these steps:
1. Obtain TCS Certificate- Ensure that you have received a TCS certificate from the seller or collector. The TCS certificate serves as proof of tax collection and contains details such as the TCS amount, the buyer’s details, the seller’s details, and the nature of the transaction.
2. File ITR- Include the TCS details while filing your income tax return. Declare the TCS amount in the appropriate section of the income tax return form. The TCS details are generally reported in Schedule IT TCS (Income Tax – Tax Collected at Source) or the relevant section of the income tax return form, such as ITR-1, ITR-2, etc., depending on your income sources and eligibility.
3. Form 26AS- Verify that the TCS amount is reflected in your Form 26AS, which is a consolidated statement of tax credits. Form 26AS displays details of taxes deducted or collected on your behalf, including TCS. Ensure that the TCS amount matches the TCS certificate received.
4. TCS Credit:– If the TCS amount exceeds your tax liability, the excess TCS amount can be claimed as a credit against your total tax liability. The TCS credit will reduce the amount of tax payable.
5. Refund- If the TCS amount is higher than your final tax liability, resulting in an excess amount paid, you can claim a refund for the excess TCS amount. You can request the refund while filing your income tax return, providing the necessary bank account details for the refund to be credited.
Know the truth behind TCS in India
It’s important to note that the TCS process may vary based on the specific transactions, applicable rates, thresholds, and other factors. It is advisable to consult a tax professional or refer to the latest tax regulations for accurate guidance on the TCS procedures of the Indian Government.