22 Dec 2021
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The Income Tax Act, 1961 governs the rules of taxation in India. Regulations regarding the amount of taxes to be paid or the frequency at which taxes need to be paid are all laid out under this act. As part of the Finance Act 2020, a new provision for tax collection at source (TCS) was laid out regarding the sale of goods under the form of Section 206C of the Income Tax Act.

What is 206C of the Income Tax Act?

Section 206C of the Income Tax Act 2020 was introduced in order to extend benefits of tax collection at source (TCS) for sellers of goods. As per Section 60C(1H) of the Income Tax Act, sellers can deduct TCS if the aggregate value of the goods sold is higher than ₹50 lakhs in the financial year in question. Section 206C of the Income Tax Act now allows sellers to deduct taxes at the time of receiving the amount from the buyer.

It is also important to note that Section 206C of the Income Tax Act is only applicable to sellers whose gross turnover was higher than ₹10 crores in the financial year previous to the one when this sale is carried out. It is also not applicable on goods that are being imported to India.

Applicability and Rate under Section 206C of the Income Tax Act

If you are looking for information on Section 206C of the Income Tax Act 2020 and want to know whether it applies to you, read on below to learn the applicability as well as rate for tax collected at source (TCS) on the goods you are selling.

Nature of Goods

Rate of TCS (upto 13.05.2021)

Rate of TCS (from 14.05.2020 to 31.03.2021)

Alcoholic Liquor for Human Consumption

1%

1% (no change)

Tendu Leaves

5%

3.75%

Timber Obtained Via Forest Lease

2.5%

1.875%

Timber Obtained Via Any Other Mode

2.5%

1.875%

Forest Produce Other Than Timber or Tendu Leaves

2.5%

1.8756%

Scrap

1%

0.75%

Minerals, including coal, lignite, iron ore, etc.

1%

0.75%

Time Limit for Deposit of Tax Under Section 206C

The tax collected at source (TCS) by sellers is required to be deposited to the Central Government. Sellers are required to deposit the tax collected under Section 260C of Income Tax Act within 7 days of the ending of the month in which the tax was to be collected.

TCS Return Under Section 206C of Income Tax Act

Buyers charged TCs through Section 206C of Income Tax Act 2020 are required to file their income tax returns within certain dates specified under the amendment in Section 206C of Income Tax Act. If you are a buyer who has been charged TCS by a seller on a certain transaction, read on below to learn the timelines within which you are required to file TCS returns.

Quarter Ending

Due Date for Filing Return

June 30

July 15 of the financial year in question

September 30

October 15 of the financial year in question

December 31

January 15 of the financial year in question

March 31

May 15 of the financial year immediately after the financial year in which TCS was deducted

When is the Certification of Tax Collection at Source Issued?

The certification for the tax collection at source under Section 206C of Income Tax Act is to be issued within 15 days of the quarterly returns being furnished.

Credit for TCS Under Section 206C of the Income Tax Act

Under Section 206C of the Income Tax Act 2020, the amount collected from the buyer is considered to be a tax payment made by them. The buyer is, thus, entitled to get a tax credit of the corresponding amount.

Consequences of Failure to Collect Tax at Source

There are several situations that can be considered as failure to collect the tax at source, as per Section 206C of the Income Tax Act. These can either include not collecting the total amount due for taxation, or even failure to pay the tax forward to the government as required. However, there are situations wherein the buyer is not considered to be in default of the Section 206C of the Income Tax Act, even under amendment in Section 206C of the Income Tax Act. Read on below to learn the cases where the buyer is not considered to be a defaulter.

 

  1. If they have furnished their income returns through Section 139

  2. If the buyer has considered the account for computing income as part of income returns

  3. If the buyer has paid this amount due as tax on the income they have declared as part of income returns and, as long as they are able to furnish a certificate to this effect.

Through these above-mentioned clauses, the seller is not liable to any of the consequences they would otherwise be liable to owing to a failure to collect tax at source. It is important to know these considerations in order to ensure you are not running afoul of the rules and guidelines in place, even by accident.