income tax

Navigating TCS Regulations for Sales Exceeding Rs. 50 Lacs

Understanding TCS Collection on Sales Exceeding Rs. 50 Lacs

In accordance with the provisions regarding Tax Collection at Source (TCS), the following guidelines apply:

Applicability of TCS

Any individual with a gross turnover, receipts, or sales from their business exceeding Rs. 10 Crores in the preceding financial year (excluding entities notified by the Central Government in the official gazette) is subject to the TCS regulations.

If such a seller has conducted sales to a buyer exceeding Rs. 50 lacs after October 1, 2020, the following rules apply:

  • TCS Requirement: Upon further sale of goods to that particular buyer, the seller must collect TCS at a rate of 0.1% on any amount exceeding the initial Rs. 50 lacs when receiving payment.

Important Considerations

  • PAN or AADHAR Requirement: If the buyer does not furnish their PAN or AADHAR details, the applicable TCS rate will increase to 1%, replacing the standard 0.1%.

  • Exemption for Export Sales: It is essential to note that this TCS provision does not extend to export sales, meaning TCS is not required in such cases.

  • Timing of TCS Collection: TCS is to be collected at the time of payment, not at the billing process.

  • Deposit Deadline: Sellers must deposit the collected TCS by the 7th day of the month succeeding the month in which the TCS amount was collected.

Key Points About the Rs. 50 Lacs Limit

  • TCS is not applicable on the first Rs. 50 lacs of sales. Subsequently, TCS is applicable only on sales exceeding this threshold.

  • The calculation of sales concerning the Rs. 50 lacs limit begins from October 1, 2020. Therefore, any sales made to the buyer before this date do not count toward the limit.

Exemptions from TCS

Certain buyers are exempt from the TCS provisions, including:

  • Central Government
  • State Government
  • Embassies, High Commissions, legations, and consulates
  • Local authorities
  • Importers and other entities notified by the government

Additionally, transactions eligible under:

  • Section 206C(1): Sale of scrap, tendu leaves, timber, etc.
  • Section 206C(1F): Sale of motor vehicles exceeding Rs. 10 lacs
  • Section 206C(1G): Remittance under the Liberalized Remittance Scheme will not incur TCS under this section.

Conclusion

Understanding the TCS regulations is crucial for compliance. Sellers must diligently track their sales and ensure proper TCS collection and remittance to avoid penalties.