“Tax Collected At Source”

What is Tax Collected at Source (TCS)?

Tax Collected at Source (TCS) is a tax collection mechanism in India where the seller collects a certain percentage of the sale amount as tax from the buyer at the time of sale. The seller then deposits this tax with the government. TCS is applicable on specific transactions as per the Income Tax Act, ensuring that tax is collected in a distributed manner across the country.

Types of Tax Collected at Source (TCS)

There are various types of transactions on which Tax Collected at Source(TCS) is applicable, including the sale of goods, sale of scrap, sale of motor vehicles, sale of minerals, sale of bullion, and more. The rate of TCS varies depending on the type of transaction and the entity involved.

Difference Between TDS and TCS

While both TDS (Tax Deducted at Source) and TCS involve tax collection, they differ in terms of their application. TDS is deducted by the payer (the one making the payment) and is applicable on various payments like salary, interest, etc. On the other hand, TCS is collected by the seller from the buyer at the time of sale and is applicable to specific transactions.

FAQs

What is the limit of TCS exemption?

The Income Tax Act provides specific limits beyond which TCS is applicable. For example, in the case of the sale of goods, TCS is applicable if the sale amount exceeds a particular threshold set by the government.

What is TCS and why is it deducted?

TCS is collected to ensure tax compliance and revenue generation. It’s deducted to collect a portion of tax at the time of transaction itself, thus widening the tax base and preventing tax evasion.

Also See: Tax Savings