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October 10, 2020

Practical examples with questions & answer for understanding the calculation of Tax Collected at Source (TCS)

  • On which amount TCS shall be collected?

TCS is to be levied only on the amount above Rs. 50 lakhs i.e. if Rs. 60 lakhs is received from a single person during the financial year for sale of goods then TCS to be collected on amount of Rs. 10 Lakhs @ 0.075% (i.e. after deducting the amount of Rs. 50 Lakhs from Rs. 60 Lakhs and then after TCS has to be paid in every month on amount in excess of Rs. 50 Lakhs).

If goods of more than Rs. 50 Lakhs is sold before 01/10/2020 (i.e. Bill has made) and its payment received after 01/10/2020 then also TCS to be levied on amount received after 01/10/2020.

Illustration 1: Sales made to a buyer is less than Rs. 50 Lacs up to 30-09-2020:

1 Sales up to 30-09-2020 Rs. 35 lacs
2 Amount received up to 30-09-2020 Rs. 25 lacs
3 Invoices raised from 01-10-2020 Rs. 30 lacs

As TCS shall be applicable beyond receipts of Rs. 50 Lacs. Therefore, on the initial receipt of Rs. 25 Lacs after 01-10-2020, TCS shall not be applicable. Consequently, TCS shall be applicable on Rs. 15 Lacs [Rs. 35 Lacs + Rs. 30 Lacs – 50 Lacs] as and when total Rs. 65 Lacs shall be received.

Illustration 2: Sales made to a buyer is more than Rs. 50 Lacs up to 30-09-2020:

1 Sales up to 30-09-2020 Rs. 65 lacs
2 Amount received up to 30-09-2020 Rs. 30 lacs
3 Invoices raised from 01-10-2020 Rs, 20 lacs

As TCS shall be applicable beyond receipts of Rs. 50 Lacs. Therefore, on the initial receipt of Rs. 20 Lacs after 01-10-2020, TCS shall not be applicable. Consequently, TCS shall be applicable on Rs. 35 Lacs [Rs. 65 Lacs + Rs. 20 Lacs – Rs. 50 Lacs] as and when whole amount of Rs. 85/- lacks will be received.

Illustration 3: Amount received from a buyer is more than Rs. 50 Lakh up to 30-09-2020:

1 Sales up to 30-09-2020 Rs. 65 Lacs
2 Amount received up to 30-09-2020 Rs. 55 Lacs
3 Invoices raised from 01-10-2020 Rs. 20 Lacs

As provision of TCS implemented from 01-10-2020, therefore TCS cannot be charged on collections made prior to 01-10-2020. Therefore, in this case, TCS shall be charged on the receipt of amount on or after 01-10-2020 i.e. on Rs. 30 Lacs [Rs. 65 Lacs + Rs. 20 Lacs – Rs. 55 Lacs].

  • Whether TCS is to be collected on the amount of sale including GST?

The FAQ issued by the Income Tax Department on TCS, provides that “the amount debited to the account of buyer or payment shall be received by seller inclusive of GST. As such, TCS to be collected on inclusive of GST.”

  • Which types of transactions will not be subject to TCS?

Export and import transactions and transactions on which TDS has to be deducted or TCS has to be collected under other section of any other law, than TCS will not be levied on such transactions.

  • When to deposit TCS amount?

The amount of TCS collected @ 0.075 % should be deposited in the government before 7th of the month following the month in which the payment was received and its quarterly return must be filed in Form no. 27EQ.

  • In the case of non-availability of PAN of the buyer, what shall be rate at which TCS to be collected?

Section 206C(1H) specifically provides that TCS shall be collected at the rate of 1% of sale consideration in case buyer of the goods fails to provide its PAN.

  • How and when to charge TCS from buyer?

There are two options available to collect TCS from Buyer

(1) The TCS can be collected by charging through invoice.

(2) The TCS can be collected by charging through debit note.

 

For more information please contact us

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