Context:
Income Tax department has recently notified list of luxury items on which taxpayers will have to pay 1% Tax Collected at Source.
Tax Collected at Source (TCS):
- A type of direct tax collected by the seller from the buyer at the point of sale.
- The seller has the responsibility to collect the tax at the prescribed rate and remit it to the government.
- Governed under Income Tax Act, 1961.
- Rates vary depending on the nature of goods or services.
- Exemptions – Certain categories of buyers such as government institutions may be exempt from TCS.
- TCS on Foreign Remittances – A special category where TCS is applicable for foreign tour packages and foreign remittances exceeding ₹7 lakh in a financial year.
- Due Dates & Filing – TCS collected must be deposited within the stipulated timeline and reported via quarterly TCS returns.
- Credit Availability – Buyers can claim TCS as a credit while filing their income tax returns.
Comparison of TCS and TDS:
| Aspect | TCS (Tax Collected at Source) | TDS (Tax Deducted at Source) |
| Definition | Tax collected by the seller at the time of sale from the buyer. | Tax deducted by the payer at the time of making payment to the recipient. |
| Applicability | Levied on specified goods and services. | Levied on various payments like salaries, professional fees, rent, interest, etc. |
| Person Responsible | Seller (collector) collects the tax. | Payer (deductor) deducts the tax. |
| Governed under | Income Tax Act, 1961. | Income Tax Act, 1961. |
| Rate of Tax | Varies based on goods/services. | Varies based on payment type. |
| Deposit to Government | The seller must deposit TCS with the government. | The deductor must deposit TDS with the government. |
| Exemptions | Certain categories of buyers are exempt. | Some payments have exemptions and lower rates. |
| Credit to Buyer/Recipient | Buyer can claim TCS as a tax credit in ITR. | Deductee can claim TDS as a tax credit in ITR. |
| Filing Compliance | TCS returns filed quarterly. | TDS returns filed quarterly. |
| Due Dates | Monthly deposit, quarterly filing. | Monthly deposit, quarterly filing. |
Source: IE
Previous Year Question
What is/are the most likely advantages of implementing ‘Goods and Services Tax (GST)’?
1. It will replace multiple taxes collected by multiple authorities and will thus create a single market in India.
2. It will drastically reduce the ‘Current Account Deficit’ of India and will enable it to increase its foreign exchange reserves.
3. It will enormously increase the growth and size of the economy of India and will enable it to overtake China in the near future.
[UPSC Civil Services Exam – 2017 Prelims]
(a) 1 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3
Answer: (a)