Tax Collection at Source (TCS) [Section 206C]

1. Rates of TCS in different Cases

2. Higher Rate of TCS if PAN is not furnished by Collectee [Section 206CC]

3. Time of Payment of TCS to Government Account

4. Statement of Tax (TCS) Collected and Deposited [Proviso to Section 206C(3) and Rule 31AA(1)]:

5. Issue of TCS Certificate [Section 206C(5) & Rule 37D]:

6. Failure to collect tax (TCS) required under section 206C(1) [Section 206C(6)]:

7. Penalty in default of TCS under Section 221 [Section 206C(6A)]:

1. Rates of TCS in different Cases

Under section 206C, tax has to be collected at source in the following cases.

Note : (In some cases, these Rates are subject to Surcharge and Health and Education Cess)

1. If the purchaser or the licensee is a foreign company and the amount subject to tax collection (TCS) is more than Rs. 1 crore, but not more than Rs. 10 crore, surcharge is 2% of TCS during 2018-19

( it is 5% of TCS if such amount is more than Rs. 10 crore).

2. If purchaser/licensee is non-resident firm/co-operative society, surcharge @ 12% is applicable only if amount subject to TCS is more than Rs. 1 crore.

3. If purchaser / licensee is Non-Resident individual / HUF / AOP / BOI, surcharge at the rate of 15% is applicable if amount subject to TCS is more than Rs. 1 crore

( Surcharge is 10% if purchaser / licensee is non-resident individual / HUF / AOP / BOI and the amount subject to TCS is more than Rs. 50 lakh but not more than Rs. 1 crore).

4. If purchaser or licensee is a Non-Resident or a Foreign Company, Health and Education Cess of 4% (of TCS+SC) is applicable.

5. In no other case, Surcharge and Health and Education Cess shall be added.

2. Higher Rate of TCS if PAN is not furnished by Collectee [Section 206CC]

(1) Higher rate of TCS if the collectee does not furnish PAN [Section 206CC(1)]:

Notwithstanding anything contained in any other provisions of this Act, any person paying any sum or amount, on which tax is collectible at source under Chapter XVII-BB (herein referred to as collectee) shall furnish his Permanent Account Number to the person responsible for collecting such tax (herein referred to as collector), failing which tax shall be collected at the higher of the following rates, namely:—

1. at twice the rate specified in the relevant provision of this Act; or

2. at the rate of 5%

(2) Declaration in Form No. 27C not valid if PAN is not provided [Section 206CC(2)]:

No declaration under section 206C(1A) in Form No. 27C shall be valid unless the person furnishes his Permanent Account Number in such declaration.

(3) Consequences if the declaration furnished is invalid [Section 206CC(3)]:

In case any declaration becomes invalid under section 206CC(2), the collector shall collect the tax at source in accordance with the provisions of section 206CC(1).

(4) Application for obtaining certificate for lower deduction of TCS [Section 206CC(4)]:

No certificate under section 206C(9) shall be granted unless the application in Form No. 13 made under that section contains the Permanent Account Number of the applicant.

(5) Colletor and collectee to indicate PAN in all correspondence, bills, etc. [Section 206CC(5)]:

The collectee shall furnish his Permanent Account Number to the collector and both shall indicate the same in all the correspondence, bills, vouchers and other documents which are sent to each other.

(6) Invalid or wrong PAN will attract TCS as per section 206CC(1) [Section 206CC(6)]:

Where the Permanent Account Number provided to the collector is invalid or does not belong to the collectee, it shall be deemed that the collectee has not furnished his Permanent Account Number to the collector and the provisions of sub-section (1) shall apply accordingly.

(7) Provisions not applicable in case of non-resident have been no PE in India [Section 206CC(7)]:

The provisions of this section shall not apply to a non-resident who does not have permanent establishment in India.

3. Time of Payment of TCS to Government Account

All sums collected in accordance with the provisions of section 206C(1), or (1C) shall be paid to the credit of the Central Government as under.

1. Where tax is collected by an office of the Government

   1. on the same day where the tax is so paid without production of an income-tax challan; and

   2. on or before seven days from the end of the month in which the collection is made, where tax is paid accompanied by an income-tax challan.

2. In any other case

   Within One Week from the last day of the month in which the TCS Collection is made.

4. Statement of Tax (TCS) Collected and Deposited [Proviso to Section 206C(3) and Rule 31AA(1)]:

The person collecting tax on or after 1.4.2005 in accordance with the provisions of section 206C(1), or (1C), or (1D) [(ID) omitted w.e.f. 1.4.2017] shall, after paying the tax collected to the credit of the Central Government within the prescribed time, prepare such statement for such period as may be prescribed and deliver or cause to be delivered to the Principal Director General of Income Tax (Systems) or Director General of Income-tax (Systems), or the person authorised by the Principal Director General of Income Tax (System) or Director General of Income-tax (Systems), such statement in Form No. 27EQ.

5. Issue of TCS Certificate [Section 206C(5) & Rule 37D]:

The person responsible for collecting the tax is required to issue a certificate of collection of tax at source to the collectee in Form No. 27D within 15 days from the due date of furnishing the statement of tax collected at source specified under rule 31AA(2). [Rule 37D(1) & (3)].

In other words, certificate in Form No. 27D should be issued within the time limit specified as under:

As per rule 37D(2) the above certificate shall specify:

1. valid permanent account number (PAN) of the collectee;

2. valid tax deduction and collection account number (TAN) of the collector;

3. 1. book identification number or numbers where deposit of tax collected is without production of challan in case of an office of the Government;

   2. challan identification number or numbers in case of payment through bank;

4. receipt number of the relevant quarterly statement of tax collected at source which is furnished in accordance with the provisions of rule 31AA.

Further, prescribed income-tax authority or person authorized by such authority shall prepare and deliver to the buyer or licence or lessee as the case may be, a statement in Form 26AS specifying the amount of tax collected and such other particulars as may be prescribed.

6. Failure to Collect Ttax (TCS) required under section 206C(1) [Section 206C(6)]:

Any person responsible for collecting the tax who fails to collect the tax in accordance with the provisions of this section, shall, notwithstanding such failure, be liable to pay the tax to the credit of the Central Government in accordance with the provisions of sub-section (3).

7. Penalty in default of TCS under Section 221 [Section 206C(6A)]:

If any person responsible for collecting tax in accordance with the provisions of this section does not collect the whole or any part of the tax or after collecting, fails to pay the tax as required by or under this Act, he shall, without prejudice to any other consequences which he may incur, be deemed to be an assessee in default in respect of the tax.

Provided that any person, other than a person referred to in section 206C(1D) [(ID) omitted w.e.f. 1.4.2017], responsible for collecting tax in accordance with the provisions of this section, who fails to collect the whole or any part of the tax on the amount received from a buyer or licensee or lessee or on the amount debited to the account of the buyer or licensee or lessee shall not be deemed to be an assessee in default in respect of such tax if such buyer or licensee or lessee—

1. has furnished his return of income under section 139;

2. has taken into account such amount for computing income in such return of income; and

3. has paid the tax due on the income declared by him in such return of income, and the person furnishes a certificate to this effect from an accountant in such form as may be prescribed.

Further, no penalty shall be charged under section 221 from such person unless the Assessing Officer is satisfied that the person has without good and sufficient reasons failed to collect and pay the tax.