TCS COMPLIANCE
Ever noticed how tax gets deducted even before you receive your full payment?
That’s TCS – Tax Collected at Source, where the seller becomes the tax collector for the government!
Under the Income Tax Act, certain sellers are required to collect a small percentage of tax from the buyer at the time of sale of specific goods or services — like scrap, coal, liquor, or even foreign remittances — and deposit it directly to the government. This entire process of collecting, depositing, and reporting that tax is called TCS Compliance.
In short, TCS compliance ensures that tax reaches the government the moment a transaction happens, making it a smart system to reduce evasion and increase transparency in trade.
WHY TCS COMPLIANCE IS IMPORTANT?
- Ensures Early Tax Collection
- Improves Transparency
- Prevents Tax Evasion
- Facilitates Buyer’s Credit
- Enhances Business Credibility
- Supports Government Revenue Flow
FAQs
TCS must be collected at the earlier of (a) when the seller credits the sale to their books, or (b) when the money is received from the buyer.
Goods like scrap, timber, minerals, and high-value motor vehicles (exceeding ₹10 lakh) among others.
Yes — for education and medical remittances, there is exemption up to ₹10 lakh in a year. ₹10 lakh is a threshold for many remittance types.
Late deposit or failure to collect could attract interest (1% per month) and penalties under Section 271H.
Generally, no. TCS is mostly on domestic specified goods or remittances. (Exports are exempt in many cases.)