Indian Income Tax act has provisions for tax collection at source. In these provisions, certain persons are required to collect a specified percentage of tax from their buyers on exceptional transactions. Most of these transactions are trading or business in nature. It does not affect the common man.
If the person responsible for collection of TCS fails to collect or after collecting fails to pay, he shall be deemed to be an assessee in default in respect of the tax and various consequences will follow.
Classification of Sellers and Buyers for TCS
- Under TCS mechanism a Seller is defined as any of the following:
- Central Government
- State Government
- Local Authority
- Statutory Corporation or Authority
- Company registered under Companies Act
- Partnership firms
- Co-operative Society
- 8. Any person or HUF who is subjected to an audit of accounts under Income Tax Act for a particular financial year.
- Classification of Buyer for TCS:-A buyer is one who as an individual or single entity obtains goods or even the right of receiving goods at a sale, tender, auction or other modes. The following are people and organizations who are exempted from the classification as buyers for tax collected at source:
- Public Sector Entities or Companies
- Central Government
- State Government
- Embassy of High Commission
- Consulate and other Trade Representation of a Foreign Nation
- Clubs such as sports clubs and social clubs
Contents of Form 27 EQ
The form contains five sections namely Section 1, Section 2, Section 3, Section 4 and Section 5.
Section 1:-This section is for the deductor, where he/ she has to enter the following details.
- TAN Details
- PAN Details
- The financial year
- The assessment year
- If a statement has already been filed for the quarter in question
- If a statement has been filed then the provisional receipt number of the original statement will be required
Section 2:-This section is for the collector, where he/ she has to enter the following details and information.
- The collector’s name
- The collector’s branch or division, if applicable
- The collector’s personal details like Residential Address, Phone number and E-Mail ID.
Section 3:-This section is for the person who is in charge of collecting the tax.
- The individual’s name
- The individual’s full address
Section 4:-This section has to be filled with information pertaining to the tax that is collected at source and the tax that is paid to the credit of the Central Government.
- Collection code
- The amount of Tax Collected at Source (TCS)
- The Surcharge amount
- Amount of Education Cess
- The amount of interest that has been levied
- Any other amount
- Total tax deposit amount which is the sum of the aforementioned amounts
- Cheque number or Demand Draft number if applicable
- The BSR code
- The date on when the tax amount was deposited
- The number mentioned in the transfer voucher or the challan serial number
- If the Tax Collected at Source has been deposited via book entry
Section 5:- In this section, the taxpayer has to mention the details of the tax that has been collected and the details of the amount that has been paid with appropriate signatures. All details have to be entered in the annexure that is provided with the form.
Penalties for making payment to Government Account
- If the tax collector responsible for collecting the tax and depositing the same to the Government does not collect the tax then he will be liable to pay interest of 1% per month or a part of the month. In addition to the amount of TCS he failed to collect. If after collecting doesn’t pay the tax to the Government within due dates, then he is liable for interest @ 1% per month of delay, rate of interest is 0.75% per month or part of the month.
- The person would also be liable for penalty u/s 271CA of the Act, which would be equal to amount of tax liable to be collected.
- The person will also be liable to prosecution u/s 276BB of the Act, term of which is up to 7 years of imprisonment.
Qus:- What is TCS form?
The above amendments to the laws apply to government offices where tax has been collected to the account of the Central Government without the production of a challan along with the deposit of the tax in a bank. Form 24G must be submitted.
Qus:- How is TCS exempted?
When the qualifying items are purchased for personal use. The commodities are purchased for manufacturing, refining, or production, not for trade.
Qus:- When TCS is required to be deducted?
New section 206 (1H) was introduced in October 2020 for collecting TCS from the buyers of goods who makes a payment of more than Rs 50 lakhs towards sale consideration in the current FY. The TCS is to be collected only by the entities having more than Rs 10 crore of turnover in the previous FY.
Qus:- Is TCS return mandatory?
It is mandatory to file quarterly TCS return within prescribed due dates. If a return is not filed within due dates then the deductor/collector will be liable to pay penalty for the late filing of return.