If you have ever come across the term TCS in income tax, you might wonder What is TCS in Income Tax. TCS stands for Tax Collected at Source, a tax collected by the seller from the buyer at the time of sale. The seller then deposits it with the government. This concept is part of the Income Tax Act, 1961, and applies to certain specified goods and services.
How TCS in Income Tax Works
The process is simple. When a seller sells specific goods such as scrap, minerals, or timber, they collect an additional percentage as TCS from the buyer. For example, if the item is priced at ₹1,00,000 and the TCS rate is 1%, the seller will collect ₹1,01,000 in total. Out of this, ₹1,000 is TCS, which the seller deposits to the government using the buyer’s PAN.
When TCS Applies
TCS in income tax is applicable in specific cases, such as:
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Sale of alcohol for human consumption
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Sale of forest produce like timber and tendu leaves
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Sale of scrap, minerals, or motor vehicles above a certain value
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Certain overseas remittances and foreign tour packages
The rates vary depending on the type of goods or services.
Difference Between TCS and TDS
While both TCS and TDS involve tax collection, the difference lies in who collects it and when. In TCS, the seller collects tax at the point of sale, whereas in TDS, the buyer deducts tax while making a payment.
How to Claim TCS Credit
The TCS amount collected by the seller appears in your Form 26AS. While filing your income tax return, you can claim this amount as a tax credit, reducing your total tax liability.
Income Tax Return – File Here
Conclusion
Understanding what TCS in income tax means helps both buyers and sellers comply with the law. By knowing the rules, rates, and applicability, taxpayers can ensure proper compliance and avoid penalties.