1. Overview
- Applicability: Mandates sellersto collect Tax at Source (TCS) on receipt of sale consideration from buyers if:
- Seller’s turnover > ₹10 crorein the preceding financial year.
- Sale value > ₹50 lakhin a financial year (per buyer).
- Purpose: To track high-value transactions and improve tax compliance.
2. Key Provisions
| ASPECT | DETAILS |
| TCS Rate | 0.1% (1% if PAN not provided) |
| Threshold | ₹50 lakh (aggregate receipts from a buyer in a financial year) |
| Goods Covered | All goods (except exports, bullion, jewellery, and transactions under other TCS sections) |
| When to Collect | At the time of receipt (cash/cheque/digital payment) |
Exemptions
- Government entities(central/state, PSUs).
- Buyers submitting Form 27C(for manufacturing/processing).
- Transactions already covered under other TCS sections (e.g., 206C(1), (1C), etc.).
3. Compliance Requirements
- For Sellers
- Verify Buyer’s PAN(else deduct 1% TCS).
- Collect TCSat the time of receipt of payment (not invoice issuance).
- Deposit TCSby the 7th of the next month.
- File Quarterly TCS Returns (Form 27EQ).
- Issue TCS Certificate (Form 27D)within 15 days of return filing.
- For Buyers
-
- Claim TCS Creditin ITR via Form 26AS/AIS.
- Submit Form 27C(if goods are for manufacturing, not trading).
4. Penalties for Non-Compliance
| DEFAULT | CONSEQUENCE |
| Failure to collect TCS | Penalty = TCS amount + 1% monthly interest |
| Late deposit | 1.5% monthly interest |
| Non-filing of returns | ₹200/day (max. TCS amount) |
| Incorrect filing | ₹10,000–₹1,00,000 penalty (Section 271H) |
5. Judicial & CBDT Clarifications
- No TCS on advances(only on actual receipt).
- TCS applies even if buyer is a small trader(if seller’s turnover > ₹10 crore).
- No double TCSif already covered under other sections.
6. Practical Example
- Seller: A steel distributor with ₹15 crore turnover in FY 2023-24.
- Buyer: Purchases goods worth ₹60 lakh in FY 2024-25.
- TCS Applicable: 1% of ₹60 lakh = ₹6,000(if PAN provided).
7. Recent Updates (Budget 2025)
- Threshold unchanged(₹50 lakh per buyer).
- No TCS on exports(even if turnover > ₹10 crore).
Key Takeaways
✔ Applies only if seller’s turnover > ₹10 crore & sale > ₹50 lakh per buyer.
✔ Rate: 0.1% (1% if PAN not provided).
✔ Deposit TCS by 7th of next month & file quarterly returns.
✔ Buyers can claim credit in ITR (Form 26AS).
