What is TCS & How to record it?

The Indian Income Tax Act has provisions for tax collection at source, or TCS. In these provisions, certain persons are required to collect a specified percentage of tax from their buyers on exceptional transactions.

Introduction

Tax Collected at Source (TCS) is a tax levied by the government on the sale of certain goods or services. The seller of the goods or services is responsible for collecting TCS from the buyer at the time of sale. The collected tax is then deposited with the government on behalf of the buyer. TCS is levied on specified goods or services and is collected as a percentage of the sale price.

TCS is applicable to both individuals and companies. The tax is collected by the seller and deposited with the government. TCS is applicable to both resident and non-resident buyers.

Classification of Sellers for TCS

For tax collected at the source, a certain group of people or organizations have been designated as sellers. Aside from the following list, no other seller of goods may charge the buyer tax at source:

1. Central Government

2. State Government

3. Local Authority

4. Statutory Corporation or Authority

5. Company registered under the Companies Act

6. Partnership firms

7. Co-operative Society

8. Any person or HUF

Classification of Buyers for TCS

A buyer is a person who purchases goods of a specific nature through a sale or a right to purchase such goods through an auction, tender, or other means. The purchasers listed below are exempt from source tax collection, though. In other words, TCS need not be gathered from the people listed below.

1. Public sector companies

2. Central Government

3. State Government

4. Embassy of High commission

5. Consulate and other Trade Representation of a Foreign Nation

6. Clubs such as sports clubs and social clubs

7. When a resident buyer provides this written declaration in duplicate and uses the purchase to manufacture, process, or produce goods or energy (not for trading), they are said to be using it for those purposes.

Goods covered under TCS Provisions

Type of Goods or transactions	Rate
Liquor of alcoholic nature, made for consumption by humans	1%
Timber wood under a forest leased	2.5%
Tendu leaves	5%
Timber wood by any other mode than forest leased	2.5%
Forest produce other than Tendu leaves and timber	2.5%
Scrap	1%
Minerals like lignite, coal and iron ore	1%
Purchase of Motor vehicle exceeding Rs.10 lakh	1%
Parking lot, Toll Plaza and Mining and Quarrying	2%
Where total turnover is more than Rs.10 crore in the previous financial year and receives sale consideration of any products of more than Rs.50 lakh, such seller must collect TCS upon receiving consideration from the buyer on such amount over and above Rs.50 lakh, as per Section 206C(IH). (Without PAN, then 1% is TCS)	0.1%

How to record TCS in Swipe?

STEP 1- Open the Swipe app>> Go to Sales Section>> Click on Invoices>>click on “Additional Charges”

STEP 2- Click on New Custom Additional Charge in Document>> Add “Additional Charge Name” as TCS >> Click on Save

STEP 3-Switch on the Toggle bar for the TCS Charge

STEP 5-Mention “GST”, and the applicable TCS percentage

STEP 6- Click on “ Save” to record the Payment

Consequences of Non-Compliance:

1. Non-compliance with the provisions of TCS may attract penalties and interest. The government may levy penalties on the seller for non-collection or short-collection of TCS. The penalty may be a percentage of the amount of TCS not collected or short-collected.

2. The seller may also be liable to pay interest on the amount of TCS not collected or short-collected. The interest rate may be specified by the government from time to time.

3. The government may also initiate proceedings against the seller for non-compliance with the provisions of TCS. The proceedings may result in the seller having to pay additional taxes and penalties.

TCS Payments and Returns

1. Every amount that a government office collects must be deposited the same day it is collected.

2. The seller must deposit the TCS amount in Challan 281 within seven days of the last day of the tax collection month (if it is monthly).

3. If the tax collector in charge of gathering the tax and depositing it with the government fails to gather the tax or, after collecting it, fails to deposit it with the government by the aforementioned deadlines, he will be liable to pay interest at the rate of 1% per month, or a portion of a month.

4. Every tax collector is required to submit a quarterly TCS return, or Form 27EQ, in relation to the tax that was collected by him/her during a specific quarter. Prior to filing the return, the interest on the TCS that was paid to the government late must be paid.

Conclusion

In conclusion, Tax Collected at Source (TCS) is a tax levied by the government on the sale of certain goods or services. The seller of the goods or services is responsible for collecting TCS from the buyer at the time of sale. TCS is applicable to specified goods or services, and the rates at which TCS is collected vary depending on the nature of the goods or services sold. Non-compliance with the provisions of TCS may attract penalties and interest, and the government may initiate proceedings against the seller. Therefore, it is essential for the seller to comply with the provisions of TCS to avoid any penalties or interest. and from a new update, it is known that tax collection at source (TCS) for foreign remittances under LRS was raised from 5% to 20% in Budget 2023. Except for education and medical reasons, this will extend to international travel, sending money abroad, and other remittances. This new rule will take force on July 1, 2023.