Tax Collected at Source (TCS) is a type of income tax collected by a seller from the buyer at the time of sale of certain goods or services, as specified under the Income Tax Act of India. The seller is responsible for collecting this tax and depositing it with the government on behalf of the buyer.
TCS applies to specific transactions such as the sale of scrap, minerals, liquor, and certain high-value items like motor vehicles. It is also applicable in e-commerce transactions and on remittances under the Liberalised Remittance Scheme (LRS). The rates and items covered under TCS are predefined by the government and may change from time to time.
In practice, businesses liable to collect TCS must obtain a Tax Collection Account Number (TAN), collect the applicable TCS from customers at the point of sale, and file periodic returns with the Income Tax Department. This ensures timely compliance and helps in avoiding penalties. Buyers can later claim credit for the TCS amount while filing their income tax returns.
Understanding and managing TCS is essential for businesses involved in the sale of taxable goods or services. It not only helps in staying compliant but also streamlines tax reporting and reconciliations.
For businesses looking to simplify their TCS compliance, FinTax24’s income tax solutions offer expert support and digital tools to manage collection, filing, and reporting efficiently.
TCS is an important part of the broader tax ecosystem in India and plays a key role in ensuring transparency and traceability in high-value transactions.