PROJECT FILE
TCS
Tcs and its provisions
SUBMITTED BY: SUBMITTED TO:
Chhavi Chauhan Mrs. Archana Kaushi
[Link] (2nd year)
Roll .no
CERTIFICATE
This is to certify that Chhavi, student of
[Link] 2nd year 4th semester (section-A)
has completed her project file on the
topic residential status of an individual
under the guidance and supervision of
the teacher in charge Mrs. Archana
Kaushik.
Students signature Teacher’s signature
ACKNOWLEDGEMENT
I would like to express my special
thanks of gratitude to my teacher Mrs.
Archana Kaushik, who gave me this
golden opportunity to do this
wonderful project on the topic
residential status of an individual,
which also helped me in doing
research and I got to know about so
many things.
Chhavi Chauhan [Link]
4th Sem
[Link] Topic Page no.
1. Certificate 2
2. Acknowledgement 3
3. Introduction 5
4. Residential status 6
5. Importance 7
6. Residential status of 9
individual
7. Calculation 11
8. Exception 12
9. Deemed resident 13
10. Case study 15
11. Are the following 17
incomes included?
12 Conclusion 19
13. Bibliography 20
INTRODUCTION
Tax Collected at Source (TCS) is a concept under the Income
Tax Act, 1961, where the seller collects tax from the buyer at
the time of sale of specified goods or services and then deposits
it with the government.
Unlike income tax, which is paid later by the taxpayer, TCS is
collected in advance at the point of transaction, making it easier
for the government to track financial activities.
🔹 Meaning of TCS
TCS means that when certain goods or services are sold, the
seller:
Adds a small percentage as tax to the sale amount
Collects it from the buyer
Deposits it to the government
Nature of TCS
It is not an extra tax burden on the buyer
It is treated as advance tax, which the buyer can claim while
filing income tax return
It helps maintain transparency in transactions
🔹 Who Collects TCS?
The responsibility of collecting TCS lies with the seller, which
may include:
Companies
Firms
Government bodies
Individuals (if turnover exceeds prescribed limits)
Key Features of TCS
Collected at the time of sale or receipt of payment
Applicable only to specified goods/services
Deposited with the government within a fixed time
Reflected in the buyer’s tax records (Form 26AS
TCS Provisions under Section 206C
Tax Collected at Source (TCS) is governed by Section 206C of
the Income Tax Act, 1961.
This section lays down the rules, responsibilities, rates, and
conditions for collecting tax at the time of sale of specified
goods or services.
🔹 1. Who is Required to Collect TCS? (Seller/Collector)
The following persons are required to collect TCS:
Central or State Government
Local authoritiess
Companies
Partnership firms
Individuals/HUFs (if turnover exceeds prescribed limits)
👉 These persons are called “collectors” under Section 206C.
🔹 2. From Whom is TCS Collected? (Buyer)
TCS is collected from the buyer, i.e., the person who purchases
goods or services.
❌ Not treated as “buyer”:
Central/State Government
Embassy/consulate
Importers
Buyers using goods for manufacturing/processing (in some
cases)
🔹 3. Goods/Transactions Covered under Section 206C
TCS is applicable on specific goods such as:
Alcoholic liquor for human consumption
Tendu leaves
Timber (forest produce)
Scrap
Minerals (coal, lignite, iron ore)
Motor vehicles (above ₹10 lakh)
Sale of goods (if turnover > ₹10 crore and sales > ₹50 lakh)
🔹 4. Time of Collection
TCS must be collected at the earlier of:
Time of sale, OR
Time of receipt of payment
👉 This ensures tax is collected at the earliest stage.
🔹 5. TCS Rates
Different goods have different rates. For example:
Scrap → 1%
Tendu leaves → 5%
Timber → 2.5%
Sale of goods → 0.1%
👉 If buyer does not provide PAN/Aadhaar → higher rate
applies.
🔹 6. Threshold Limits
For general sale of goods:
Seller turnover > ₹10 crore (previous year)
TCS applicable only when sales to a buyer exceed ₹50 lakh
🔹 7. Deposit of TCS
The collected tax must be deposited to the government:
Within 7 days from the end of the month in which tax is
collected
🔹 8. Filing of TCS Returns
Quarterly return is filed in Form 27EQ
Details of buyers and tax collected must be reported
🔹 9. Issue of TCS Certificate
Seller must issue a certificate (Form 27D) to the buyer
It shows the amount of tax collected
🔹 10. Credit to Buyer
The buyer can claim TCS as tax credit
It appears in Form 26AS
Can be adjusted while filing Income Tax Return (ITR)
🔹 11. Penalty for Non-Compliance
If the seller fails to:
Collect TCS
Deposit TCS
File returns
TCS Rates & Thresholds(RecentChanges)
TCS rates and limits under Section 206C of the Income Tax Act,
1961 have been updated in 2025–2026 budgets to simplify the
system and reduce compliance burden.
🟢 1. Latest Major Changes (Very Important ⭐)
✔️ 1. Removal of TCS on Sale of Goods
Earlier:
TCS @ 0.1%
Applicable if sales > ₹50 lakh
✅ Now (from 1 April 2025): Removed completely �
cleartax +1
👉 Big relief for businesses.
✔️ 2. Increase in Threshold for Foreign Remittance (LRS)
Earlier limit: ₹7 lakh
✅ New limit: ₹10 lakh �
cleartax
👉 TCS applies only after ₹10 lakh.
✔️ 3. Changes in Education Loan Case
Earlier: TCS applied
✅ Now: No TCS if education funded by loan �
cleartax
✔️ 4. Simplification of Rates (Budget 2026 Proposal)
Government aims to make uniform TCS rate ~2% for many
items �
The Economic Times
🟢 2. Latest TCS Rates (FY 2025–26 / 2026)
🔹 A. Traditional Goods
Goods
TCS Rate
Scrap
1%
Alcoholic liquor
1%
Timber
2%–2.5%
Minerals
1%–2%
👉 (Some proposals suggest uniform 2%)
🔹 B. Motor Vehicles & Luxury Goods
Motor vehicle > ₹10 lakh → 1% TCS �
TaxGuru
Now extended to luxury items (like expensive goods) above
₹10 lakh �
cleartax
🔹 C. Foreign Remittance (LRS)
Purpose
Threshold
Rate
Education (loan)
No limit
NIL
Education/Medical
Above ₹10 lakh
5% (or ~2% proposed)
Overseas tour
Full amount
5%–20%
Other purposes
Above ₹10 lakh
20%
�
RBL Bank +1
🟢 3. Threshold Summary
Category
Threshold
Foreign remittance (LRS)
₹10 lakh
Motor vehicle
₹10 lakh
Sale of goods
❌ Removed
🟢 4. Other Important Updates
❌ Section 206C(1H) (sale of goods) removed
❌ Higher TCS for non-filers removed
✔ System simplified for businesses
Applicability & Exemptions of TCS
(Section 206C)
Tax Collected at Source (TCS) is applicable only in specific
situations as defined under Section 206C of the Income Tax
Act, 1961. It also provides certain exemptions where TCS is not
required.
🟢 1. Applicability of TCS
TCS is applicable when the following conditions are satisfied:
🔹 1. Specified Seller
Seller must be:
Company
Firm
Government body
Individual/HUF (if turnover exceeds prescribed limits)
🔹 2. Specified Goods/Transactions
TCS applies only on certain goods/services such as:
Scrap
Timber
Minerals (coal, iron ore, etc.)
Alcoholic liquor
Motor vehicles (above ₹10 lakh)
Foreign remittances (LRS)
🔹 3. Threshold Conditions
Motor vehicle → Above ₹10 lakh
Foreign remittance → Above ₹10 lakh (recent update)
👉 TCS is collected only when these limits are crossed.
🔹 4. Time of Collection
TCS is collected:
At the time of sale, or
At the time of receipt of payment
(whichever is earlier)
🔹 5. PAN Requirement
Buyer must provide PAN/Aadhaar
Otherwise, higher TCS rate will apply
🟢 2. Exemptions from TCS
TCS is not applicable in the following cases:
❌ 1. Government & Certain Institutions
No TCS is collected when buyer is:
Central or State Government
Embassy or consulate
Local authority
❌ 2. Use for Manufacturing/Processing
If buyer purchases goods for:
Manufacturing
Processing
Production
👉 Then TCS is not applicable (on declaration basis)
❌ 3. Export of Goods
TCS does not apply on exports outside India
❌ 4. Personal Consumption (in some cases)
Certain goods used for personal use may be exempt
❌ 5. Lower/Nil Collection Certificate
Buyer can apply to the Income Tax Department for:
Lower rate or
Nil TCS
👉 If approved, seller collects tax accordingly.
🟢 3. Important Note
Even if TCS is collected:
It is not an extra tax burden
Buyer can claim it as credit while filing ITR
TCS under GST
Tax Collected at Source (TCS) under GST is different from
Income Tax TCS.
It is governed by the Goods and Services Tax and applies
mainly to e-commerce transactions.
🟢 1. Meaning of TCS under GST
Under GST, TCS means:
👉 E-commerce operator collects tax from sellers who sell
goods/services through their platform and deposits it with the
government.
🟢 2. Who Collects TCS?
TCS is collected by E-commerce Operators (ECOs) such as:
Online shopping platforms
Digital marketplaces
👉 Example: If a seller sells products through an online
platform, the platform collects TCS.
🟢 3. Rate of TCS under GST
TCS Rate = 1% total
0.5% CGST
0.5% SGST
👉 For inter-state supply:
1% IGST
🟢 4. When is TCS Collected?
TCS is collected when:
Payment is made to the seller
After deducting commission/charges
👉 It is calculated on net value of taxable supplies.
🟢 5. Threshold Limit
No minimum threshold limit
👉 TCS applies on all eligible transactions through e-
commerce platforms.
🟢 6. Example
Suppose:
Seller sells goods worth ₹1,00,000 through an online platform
👉 TCS = 1% = ₹1,000
Platform collects ₹1,000 and deposits it to the government
Remaining amount is paid to the seller
🟢 7. Deposit of TCS
E-commerce operator must deposit TCS: 👉 Within 10 days
from the end of the month
🟢 8. Return Filing
Monthly return: GSTR-8
Contains details of:
Supplies made
TCS collected
🟢 9. Credit to Seller
TCS collected appears in seller’s electronic cash ledger
Seller can use it to pay GST liability
🟢 10. Key Features
Applicable only to e-commerce transactions
Collected by operator, not seller
Helps in tracking online sales
Improves tax transparency
TCS Procedure (Returns, Deposits
& Certificates)
The procedure of Tax Collected at Source (TCS) under Section
206C of the Income Tax Act, 1961 includes three main steps:
Deposit of TCS
Filing of TCS Returns
Issuance of TCS Certificate
🟢 1. Deposit of TCS
After collecting TCS from the buyer, the seller must deposit it
with the government.
🔹 Time Limit:
TCS must be deposited within 7 days from the end of the month
in which it is collected
👉 Example:
If TCS is collected in April → deposit by 7th May
🔹 Mode of Payment:
Online payment through government portal
Challan used: Challan No. 281
🔹 Important Point:
Delay in deposit leads to interest and penalty
🟢 2. Filing of TCS Returns
The seller (collector) must file TCS returns regularly.
🔹 Form Used:
Form 27EQ
🔹 Filing Frequency:
Quarterly
Quarter
Due Date
Apr–Jun
15 July
Jul–Sep
15 Oct
Oct–Dec
15 Jan
Jan–Mar
15 May
🔹 Details Included:
PAN of buyer
Amount of sale
TCS collected
Date of collection
🔹 Late Filing Consequences:
Late fee and penalties may apply
🟢 3. TCS Certificate
After filing returns, the seller must issue a certificate to the
buyer.
🔹 Form:
Form 27D
🔹 Time Limit:
Within 15 days from the due date of filing return
🔹 Purpose:
Proof that TCS has been collected and deposited
Helps buyer claim tax credit
🟢 4. Credit to Buyer
TCS appears in buyer’s Form 26AS
Buyer can:
Claim it while filing ITR
Adjust it against tax liability
🟢 5. Summary of Procedure
Seller collects TCS
Deposits within 7 days
Files quarterly return (Form 27EQ)
Issues certificate (Form 27D)
Buyer claims credit
Conclusion
The Income Tax Act, 1961 plays an important role in the Indian
taxation system. It ensures that tax is collected at the very
beginning of a transaction, which helps the government monitor
high-value purchases and reduce tax evasion.
Through this project, we understand that TCS is applicable only
on specified goods and transactions, with clearly defined rates
and threshold limits. Recent changes have simplified the
provisions, making compliance easier for businesses while
increasing transparency.
The study of TCS under both Income Tax and the Goods and
Services Tax system shows how tax collection is integrated
across different sectors, especially in traditional and e-
commerce transactions.
The proper procedure of collection, timely deposit, filing of
returns, and issuance of certificates ensures smooth functioning
of the system. It also provides credit benefits to buyers, making
it fair and efficient.
👉 Overall, TCS is an effective mechanism that strengthens the
tax system, promotes accountability, and supports the growth of
a transparent economy.