Tax Collection at Source - Concept and overview on changes in Budget 2016

1. TAX COLLECTION AT SOURCE
(TCS)
Concept & Major Changes in Budget 2016
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2. What is Tax Collection at Source?
 As per section 206C(1) of the Income Tax Act, tax is to be
collected on sale by the seller of the specified goods.
 Tax collected at source means whenever you sell something
which is covered by this section you need to collect tax from
your customers over and above the sales invoice amount.
 TCS is a form of tax additionally collected on income of the
seller.
 Eg. A sells goods of Rs. 100 to B. In this case if TCS is
applicable @ 10%, A will collected total amount of Rs. 110
from B.
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3. TDS VS. TCS
S.
N.
Tax Deducted At Source Tax Collected At Source
1. Applicable to the Buyer of
Goods / Services.
Applicable to the Seller of the
specified Goods.
2. Deducted from the
Income of the recipient.
Collected with the receipts
collected by the seller
3. TDS is in a form Expense. TCS is in a form of Income.
4. Responsibility on Buyer. Responsibility on Seller.
Goods & Rates as Specified in Section 206C in next slide
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4. Sandesh Mundra and Associates - Prepared by Naimish Padhiar - sandesh.mundra@smaca.in - 9426024975

5. Relevant Changes in Budget 2016, Applicable WEF
01.06.2016
 Sale of any Goods or Services other than Bullion or
Jewellery exceeding Rs. 2,00,000
 Sale of Motor Vehicle of Value exceeding Rs. 10,00,000
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6. Sale of any Goods or Services other than Bullion or Jewellery
 Relevant Provision:
SECTION 206C
(1D) Every person, being a seller, who receives any amount in cash as
consideration for sale of bullion or jewellery, or any other goods (other than
bullion or jewellery) or providing any service, shall, at the time of receipt of
such amount in cash, collect from the buyer, a sum equal to one per cent of
sale consideration as income-tax, if such consideration,—
(i) for bullion, exceeds two hundred thousand rupees; or
(ii) for jewellery, exceeds five hundred thousand rupees; or
(iii) for any goods, other than those referred to in clauses (i) and (ii), or any
service, exceeds two hundred thousand rupees:
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7. Sale of any Goods or Services other than Bullion or Jewellery
 Sale of any Goods or Services
 Consideration should exceed Rs.2,00,000 (may be either in cash, cheque
or draft or any other means)
 Seller to collect tax @ 1% of the Consideration at the time of receipt of
any amount in cash
 Applicability to be check on single bill / invoice basis
 Applicable irrespective of a person be a manufacturer, trader or
purchased for the personal consumption
 Person can obtain lower TCS certificate by submitting Form no. 13
 Required to obtain & maintain PAN for all the transaction above Rs. 2
Lacs
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8. Sale of any Goods or Services other than Bullion or Jewellery
 TCS @ 1% to be collected even if no PAN is provided by the Purchaser. In that
case Form 60 to be obtained from the Purchaser and Annual Information
Return in Form 61 also to be filed. Deduction at higher rate in case PAN not
available is not applicable.
 If any payment is liable to TDS then the provisions of TCS of this section will
not be applicable.
 For Eg. - A Purchased goods from seller for Rs. 8 Lakhs on 1st Jun,16. Payment
of Rs.7,80,000/- is made by cheque on 7th Jun,16. Balance is Paid through Cash
on 8th Jun,16, then in such case seller will collect TAX AT SOURCE @ 1% of Rs.8
Lakhs
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9. Sale of Motor Vehicle of Value exceeding Rs. 10 Lakhs
 Relevant Provision:
SECTION 206C
(1F) “ Every person, being a seller, who receives any amount as
consideration for sale of a motor vehicle of the value exceeding ten lakh
rupees, shall at the time of receipt of such amount, collect from the
buyer, a sum equal to one percent of the sale consideration as income
tax.
 Applicable to all modes of Sales Consideration received through
cheque, cash or any other mode.
 TCS to be collected, if Motor vehicle of value exceeding Rs. 10,00,000
purchased for personal consumption
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10.  To be collected at the time of receipt of invoice.
 To be charged on consideration amount (including VAT).
 Applicable on all types of motor vehicles including trucks, buses, two-
wheelers and cars sold by manufacturers, exports, dealers and
government.
 No regards to amount received in stages or in one pay, to be collected at
the time of first receipt itself.
Sale of Motor Vehicle of Value exceeding Rs. 10 Lakhs
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11.  Whether any threshold limit is available for the specified goods under section
206C (Sale of Scrap, Tendu Leaves, etc.)?
Ans: There is no threshold limit available for the sale of scrap or other goods as
specified in section 206C.
 Whether the provision of sale of goods / services in excess of Rs. 2 Lacs are to be
calculated on single bill or invoice basis or on the aggregate transaction basis?
Ans: On a plain reading of the provision "Every person, being a seller, who receives any
amount in cash as consideration for sale of...." it is inferred that the threshold limit for
the purpose to be considered transaction wise & not the aggregate of all the
transactions for the year.
 Whether TCS has to be shown in the invoice at the time of collecting the Tax?
Ans: There is no provision regarding the same under the Act. But as per general
understanding amount should be displayed in the invoice.
Some Clarifications:
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12.  Is provisions of sale of motor vehicle & the sale of goods/services in excess of Rs. 2
Lacs applicable to an individual not in a business / profession?
Ans: Applicability of the provision for sale of motor vehicle or any goods other than
jwellery or bullion is on "Every person, being a seller........". Hence it is relevant to note
the definition of seller as per the IT Act.
“seller” means the Central Government, a State Government or any local authority or
corporation or authority established by or under a Central, State or Provincial Act, or any
company or firm or co-operative society and also includes an individual or a Hindu
undivided family whose total sales, gross receipts or turnover from the business or profession
carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section
44AB during the financial year immediately preceding the financial year in which the goods of
the nature specified in the Table in sub-section (1) or sub-section (1D) are sold or services
referred to in sub-section (1D) are provided.
From the below definition, it is clear that the applicability of the provision is only for the
individual covered under the tax audit (section 44AB).
Some Clarifications:
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