TCS means Tax Collected at Source. It means the collection of Tax at source by the seller (collector) from the buyer/ lessee (collectee or payee). Every person, being a seller, shall collect tax at source from the buyer of goods specified under Section 206C of the Income Tax Act, 1961.
Amendment to Section 206C
The Sub-Section (3A) has been inserted in Section 206C with effect from 1st June 2015. It provides that in the case of an office of the Government where the TCS has been paid to the credit of the Central Government without the production of a challan. The pay and Accounts Officer/ Treasury Office/ Cheque drawing and Distributing Officer or any other person who is responsible for crediting TCS to the credit of the Central Government. It shall be delivered to the prescribed Income Tax authority or to the person authorized by the statement in such form verified in a manner of setting forth such particular and within such time as may be prescribed.
TCS on Sale of Motor Vehicle and Goods or Services
The existing provisions of Section 206C of the Income Tax Act provide that the Tax is Collected at Source from the buyer at the time of sale of specified items by the seller at the specified rate. The Specified items are tendu leaves, alcoholic liquor for human consumption, lignite or iron ore or mineral being coal, bullion, etc. in cash if the amount exceeds Rs. 2 Lakhs.
In order to suppress the flow of unaccounted money and to reduce the quantum cash transaction in trading system or sale of any goods and services, this new amendment was proposed. According to the proposed amendment the seller shall collect the tax source @ of 1% from the purchaser/ buyer on the Sale of Motor Vehicle if the value exceeds Rs. 10 Lakhs. The Tax is collected at source if the value exceeds Rs. 2 Lakhs on sale in cash of any goods, goods other than Bullion & Jewellery, or providing of any services other than payments on which Tax is Deducted at Source under Chapter 17B.
TCS on Sale of any Goods that is goods other than bullion and jewellery or services shall not apply to a certain class of buyers who fulfill such conditions as mentioned under the proposed sub-section (1D). This amendment is proposed with effect from 1st June 2016.
Provision on TCS on Sale of Motor Vehicle above Rs. 10 Lakh
The provisions of Tax Collected at Source on sale of Motor Vehicle are provided here. These TCS provisions are applicable if the amount exceeds Rs. 10 Lakhs.
- Tax is Collected at Source on sale of motor vehicle if the amount is above Rs. 10 Lakhs.
- This Tax is collected on the vehicle by the “Seller” at the time of receipt of such amount with effect from 1st June 2016.
- TCS on Sale of Motor Vehicle if exceeds Rs. 10 Lakh to be collected by seller at the rate of 1% of the sale Consideration. The Sale Consideration is not defined here but in general, the sale consideration means the total invoice value in which the VAT is included.
- The Finance Minister of India in his Budget Speech has used the word Luxury Cars but, having regard to the language used in the provision of Section 206C(1F), it will apply to all motor vehicles whether they are luxury cars or not. The motor vehicle are such as trucks, buses, two wheelers, passenger vehicle or any other.
FAQ Related to TCS on Sale of Motor Vehicle
What is a Motor Vehicle under Income Tax Act?
A self or mechanically propelled vehicle which is commonly wheeled and adapted for use upon roads and does not operate on rails such as trams or trains, etc. These vehicles are mainly useful for transportation of passengers and for commercial purposes.
Who are required to collect TCS as Seller?
- Central Government.
- A State Government.
- Any local authority.
- Authority or Corporation, which is established by or under a Central/ State/ Provincial Act.
- Any company or a Firm.
- Co-operative society.
- An individual or a Hindu undivided family (HUF) whose total sales or gross receipts or turnover from the business or profession carried by the assessee exceeds the monetary limits, mentioned limits, etc. that are specified under clause (a) or clause (b) of section 44AB during the FY (financial year) immediately preceding the financial year in which the goods or services are provided.
Will the Manufacturer also collect the TCS?
Yes, the Manufacturers will also collect TCS from Dealers as everyone is covered here.
How to Calculate TCS on Cars?
Tax is collected at source if the amount exceeds Rs. 10 lakhs. If the amount is less than ten lakhs, then no tax is collected at Source.
Example: If you purchase a car worth Rs. 20 Lakhs then you would be required to pay the tax at the rate of 1% to the seller. This 1% would be levied on the Sale price which in this case would be 1% of 20 Lakhs = Rs. 20,000/-.
Also Read: TCS Amendments in Budget 2016