Section 206C(1) of the Income Tax Act: Tax Collection at Source (TCS)

Section 206C(1) of the Income Tax Act, 1961 mandates the collection of tax at source (TCS) by sellers related to specific goods. It applies at the time of debiting the amount payable by the buyer or at the time of receipt of such amount, whichever is earlier.

Applicability

Collection Codes under section 206CNature of PaymentTCS Rate
AAlcoholic Liquor for human consumption1%
BTimber or any other forest produce2%
CTimber obtained under any other mode other than forest lease2%
EScrap1%
ITendu leaves5%
JMinerals (coal, lignite, iron ore)1%
KBullion & jewellery1%

Note: Sections – 206CB and 206CC rates reduced from 2.5% to 2%, effective from 1st April 2025.

Persons Responsible for Collecting TCS

The obligation to collect TCS under this section lies with the seller, who may be:

  • The Central or State Government
  • Local Authorities
  • Statutory Corporations
  • Companies, Firms, or Co-operative Societies
  • Individuals or HUFs having turnover exceeding audit limits under Section 44AB in the preceding financial year

Exemption from TCS

TCS is not required if the buyer provides a declaration in Form 27C stating that the goods are to be used for manufacturing, processing, or producing articles and not for trading. The seller must:

  • Collect the form in duplicate
  • Submit one copy to the jurisdictional Chief Commissioner or Commissioner of Income Tax

Non-Compliance and Penalties

DefaultConsequence
Failure to collect TCSTreated as assessee-in-default under Section 206C(6A)
Delay in depositing TCSInterest @ 1% per month or part thereof
Late filing of Form 27EQ₹ 200 per day (Section 234E)

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