Detailed TCS

Revised update on
provisions relating to
Tax Collection at Source
u/s 206C of Income Tax Act, 1961
with special reference to amendments made by
the Finance Act, 2012
and
the Finance Act, 2016
Evolution and history of TCS
1. Before we dwell upon the contemporary TCS, it is imperative to look into the “evolution
and history of TCS.” It will help to understand and appreciate the spirit of the legislative
intent in amending the provisions relating to TCS vide the Finance Act, 2016.
 Chapter XVII-BB was inserted in the Income Tax Act, 1961 {hereinafter referred to
the Act} by the Finance Act, 1988 w.e.f. 1.6.1988.
 Originally only Section 206C {Profits and gains from the business of trading in
alcoholic liquor, forest produce, scrap etc.} was incorporated and introduced in the
aforesaid Chapter by the Finance Act, 1988 w.e.f. 1.6.1988, which has been amended
from time to time in accordance with the policies of the Government.
 Presently section 206C runs from section (1) to Section (11), which provides a
complete code in relation to “collection of tax at source”.
 Thereafter section 206CA and 206CB were inserted.
 Section 206CA {Tax-collection account number} was inserted by the Finance Act,
2002 w.e.f 1.6.2002, requiring every person collecting tax in accordance with the
provisions of section 206C to apply for allotment of “tax collection account
number”.
o However, vide proviso to sub-section (2) the provisions of section 206CA
were made non-applicable w.e.f. 1.10.2004 by the Finance (No.2) Act,
2004.
o Simultaneously, Section 203A of the Act was amended by substitution vide

the Finance (No. 2) Act, 2004 w.e.f. 1.10.2004, and under sub-section (1)
thereof, mechanism of common “tax-deduction and collection-account
number” was provided.
 Section 206CB {Processing of statement of tax collected at source} was inserted by

the Finance Act, 2015 w.e.f. 1.6.2015 providing the mechanism of processing of
“statement of TCS”.
Cont…..2
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2. CBDT Circular No. 525 dated 24.11.1988 on insertion of section 206C
 In the budget speech on the union Budget and Finance Bill of 1988, the then Minister
of Finance Sh. N. D. Tiwari, vide para 101 of his speech, had quoted as follows:
“as an anti-evasion measure, I propose to provide for assessment of income of

persons engaged in certain trades like liquor and forest contracts, at a
reasonably fixed percentage of the amount payable by them while purchasing the
goods. The tax shall be collected at source.
 Keeping in view the “memorandum explaining the aforesaid proposals, CBDT had
issued Circular No. 525 dated 24.11.1988 explaining the legislative intent and
objective in introducing the concept and provision of “tax collection at source”
(TCS), the relevant part of which as follows;
“Instructions regarding deduction of tax at source on profits and gains from

the business of trading in alcoholic liquor, forest produce, etc.
i. Considerable difficulty has been felt in the past in assessing income of

persons who take contracts for sale of liquor, forest produce, etc. It has
been the Department’s experience that for taking such contracts, firms or
associations of persons are specifically constituted and very often no trace
is left of them or their members after the contract has been executed.
ii. Persons have also been found to have taken contracts in ‘benami’ names
by floating undertakings or associations for short periods. Since tax is
payable in the assessment years on the incomes of the previous years, the
time by which the incomes from such sources become assessable, such
persons become untraceable.
iii. Moreover, at the time of assessment years in these cases, either the
accounts are not available or they are mostly incorrect or incomplete.
iv. Thus, even if assessments could be made on ex parte basis, it becomes
almost impossible to collect the tax found due, either because it becomes
difficult to establish the identity of the persons and trace them or because
of the fact the persons in whose names contracts were taken are men of no
means.
v. With a view to combating large scale tax evasion by persons deriving
incomes from such business, the Finance Act, 1988 has inserted a new
section 44AC {since omitted by the Finance Act, 1992 w.e.f. 1.4.1993} to
provide for determination of income in such cases.
vi. Further, with a view to facilitating collection of taxes from such
assessees, the Finance Act, 1988 has inserted a new section 206C to
provide for collection of such tax at source.”
Cont…..3
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3. Insertion of sub-section (1C) by the Finance (No. 2) Act 2004 w.e.f. 1.10.2004
 Finance (No. 2) Act, 2004 had inserted sub-section (1C) w.e.f. 1.10.2004 to extend
the provisions of collection of tax at source in respect of parking and toll auctions and
mining or quarrying leases with an objective to widen the tax base.
 Therefore, it was provided that every person who grants a lease or a licence or enters
into a contract or otherwise transfers any right or interest in any parking lot or toll
plaza or a mine or a quarry to another person, other than a public sector company, for
the use of such parking lot or toll plaza or mine or quarry for the purposes of
business shall collect tax from the licensee or lessee of any such licence, contract or
lease of the specified nature at the rate of two per cent, at the time of debiting of the
amount payable by the licencee or lessee to his account or at the time of receipt of
such amount from him in cash or by the issue of a cheque or draft or by any other
mode, whichever is earlier.
4. Legislative intent and thrust of the Government
 From the above it is evident that the legislative intent and the trust of the Government
at that point of time was -
o to combat large scale tax evasion in the trade of aforesaid goods by way of
tenders and contracts.
o to charge tax in respect of income of such business on presumption and

special case at fixed percentage on the value of purchases.
o to collect the tax from the buyer at the time of purchase itself.
o to widen the tax base.
5. Business vs. Profession
 The marginal head of section 206C is “Profits and gains from the business of
trading in alcoholic liquor, forest produce, scrap etc”. The title of the aforesaid
circular also comprise word “business”. It is so because this section was introduced
with the intention to compute income from the business of aforesaid
commodities/goods and to collect tax at source in relation to the amounts received
from the buyer of such commodities/goods.
 Now, vide sub-section (1D) any amount received in cash for as consideration for sale
of service exceeding Rs. 2 lakh has also been roped in the ambit of the provisions of
TCS. It means that w.e.f. 1.6.2016 the provisions of section 206C, 206CA and 206CB
shall apply to TCS on such services.
Cont…..4
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 Word “Service” is neither defined in section 206C nor under the Act. “service”
includes -
o services rendered as business
o services rendered as profession
 In sub-section (1D), services in the nature of profession have not been excluded.
On the contrary, the definition of “seller” provided in clause (c) of the Explanation
to section 206C clarifies, wherein for the purposes of sub-section (1D) individual
and HUF who are liable for audit under clause (b) of section 44AB have been
included in the definition of “seller”. Clause (b) of section 44AB applies to
“profession”, with threshold of Rs. 25 lakh up to AY 2016-17 and Rs. 50 lakh from
AY 2017-18. In the definition of “seller” profession has not been excluded for other
entities viz. company, firm or co-operative societies
 Only because the marginal head of section 206C does not include the word
“profession”, it does not mean that the amended sub-section (1D) is not applicable
to “profession” or the “professional services”.
 In this regards it may be pertinent to mention that it is the settled law that -
o Headings’,
o `Marginal Notes’ and
o `Marginal Headings’
can be referred to while interpreting the particular provision of the act. However,
Headings etc. do not decide the construction of the section, but Headings etc. are
indicative of the meaning and purpose of the section
 In the aforesaid “Heading” word “business” is used in relation to “profits and gains
from trading of alcoholic liquor, forest produce, scrap, etc., which was introduced
w.e.f. 1.6.1988, when it was intended to be used strictly for the business of aforesaid
commodities.
 Now, in 2016, sub-section (1D) has been made applicable to services also, which
shall include “services in the nature of business” as well as “services in the nature
of profession”, the “ Heading” has not been amended. Nevertheless, sub-section
(1D) shall also apply to the services in the nature of profession”.
Relevance of Finance Minister’s Speech in interpreting tax laws
6. Normally the speeches made in the Parliament by the Finance Minister are not admissible
for the purposes of interpretation of a provision on statute.
7. However as held by courts, such speech can be relied upon to understand the purpose of
the provision sought to be amended or brought on statute and in that background to
interpret that particular provision.
Cont…..5
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8. In this regards in the case of K.P. Varghese vs. ITO (1981) 131 ITR 597, 609 (SC), the
Apex Court held that -
“The Finance Minster’s speech can be relied upon to throw light on the object
and purpose of the particular provisions introduced by the Finance Bill.”
“Now, it is true that the speeches made by the members of the Legislature on
the floor of the House when a Bill for enacting a statutory provision is being
debated are inadmissible for the purpose of interpreting the statutory provision
but the speech made by the mover of the Bill explaining the reason for the
introduction of the Bill can certainly be referred to for the purpose of
ascertaining-
 the mischief sought to be remedied by the legislation and

 the object and
 the purpose
for which the legislation was enacted.
This is in accord with the recent trend in juristic though not only in Western
countries but also in India that interpretation of a statute being an exercise in the
ascertainment of meaning, everything which is logically relevant should be
admissible. In fact there are at least three decisions of this court, -
 the one in Loka Shikshana Trust vs. CIT (1975) 101 ITR 234 (SC)
 the other in Indian Chamber of Commerce vs. CIT (1975) 101 ITR 796 (SC)
 the third in Addl. CIT vs. Surat Art Silk Cloth Manufactures Association
(1980) 121 ITR 1 (SC)
where the speech made by the Finance Minister while introducing the
exclusionary clause in section 2, clause (15), of the Act was relied upon by the
court for the purpose of ascertaining what was the reason for introducing that
clause”.
Relevance of the Statement of Objects and Reasons
9. Courts have held that if the language of the statute is unambiguous, it is not required to
consider the history of Parliament in making or amending a particular statutory
provision.
10. However, the Statement of Objects and Reasons has been referred to by the Courts
where the words used in statute do not have clarity.
11. In this regard the case of S.C. Prashar v. Vasantsen Dwarkadas 49 ITR 1 (SC) is
relevant -
Cont…..6
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“Per Hidayatullah and Raghubar Dayal, JJ. : Where the language of an
enactment is clear there is hardly any need to go to the marginal note or the
history of the law before the amendment.
Per Das, J. : It is indeed true that the Statement of Objects and Reasons for
introducing a particular piece of legislation cannot be used for interpreting the
legislation if the words used therein are clear enough. But the Statement of
Objects and Reasons can be referred to for the purpose of ascertaining the
circumstances which led to the legislation in order to find out what was the
mischief which the legislation aimed at.
Per Kapur, J. : In construing an enactment and determining its true scope it is

permissible to have regard to all such factors as can legitimately be taken into
account to ascertain the intention of the Legislature such as -
i. the history of the Act,
ii. the reason which led to its being passed,
iii. the mischief which had to be cured
iv. as well as the other provisions of the statute.”
12. Article 141 of the Constitution of India provides that “the law declared by the Supreme
Court shall be binding on all courts within the territory of India.
From the speech of

Hon’ble Minister of Finance Sh. Pranab Mukharjee (as he was then)
on Union Budget, 2012
13. Section 206C was inserted in the statute book under Chapter XVII-BB by the Finance
Act, 1988 w.e.f. 1.6.1988, however, in the Union Budget of 2012 the then Minister of
Finance Sh. Pranab Mukarjee proposed amendment in section 206C to achieve different
and specific objectives, which are spelled in his budget speech, as follows .
155. I propose a series of measures to deter generation and use of unaccounted

money.
To this end, I propose –

(i) ……………..
(ii) ……………..
(iii) Tax collection at source on purchase in cash of bullion or jewellery in excess of
Rs. 2 lakh.
Memorandum explaining the proposed amendment vide Finance Act, 2012

{Tax Collection at Source (TCS) on cash sale of bullion and jewellery}
This amendment will take effect from 1st July, 2012.
Cont…..7
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14. The memorandum explaining the amendment is as follows:
Under the existing provisions of the Income-tax Act, tax is required to be collected at
source by the seller at the specified rate on certain goods like alcoholic liquor, tendu
leaves, scrap etc. at the time of sale.
In order to -
 reduce the quantum of cash transaction in bullion and jewellery sector and
 for curbing the flow of unaccounted money in the trading system of

bullion and jewellery,
it is proposed to provide that the seller of bullion and jewellery shall collect tax at the rate
of 1% of sale consideration from every buyer of bullion and jewellery if sale
consideration exceeds two lakh rupees and the sale is in cash. This would be
irrespective of the fact whether buyer is a manufacturer, trader or purchase is for
personal use.
CBDT Circular No. 3/2012, dated 12.6.2012

{Tax Collection at Source (TCS) on cash sale of bullion and jewellery}
This amendment will take effect from 1st July, 2012.
15. CBDT clarified the said amendment in circular No. 3/2012 dated 12.6.2012:
The Finance Bill, 2012, proposed to provide that the seller of bullion or jewellery shall
collect tax at source (TCS) at the rate of 1 % of sale consideration from every buyer of
bullion and jewellery in cash if the sale consideration exceeds Rs. 2 lakh. In order to
reduce the compliance burden, the threshold limit for TCS on cash purchase of jewellery
has been increased to Rs. 5 lakh from the proposed Rs. 2 lakh. The threshold limit for
TCS on cash purchase of bullion is retained at Rs. 2 lakh. Further, it has also been
provided that bullion shall not include any coin or any other article weighing 10 grams
or less.
Section 206C(1D) as amended by Finance Act, 2012
{w.e.f 1.7.2012}
16. Finally, the aforesaid law was brought on the statute book as follows:
(1D) Every person, being a seller, who receives any amount in cash as consideration
for sale of bullion (excluding any coin or any article weighing ten grams of less) or
jewellery, shall at the time of receipt of such amount in cash, collect from the buyer, a
sum equal to one per cent of sale consideration as income-tax, if such consideration,—
(i) for bullion, exceeds two hundred thousand rupees; or
(ii) for jewellery, exceeds two hundred thousand rupees.
Cont…..8
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{w.e.f 1.6.2013}
17. However, w.e.f. 1.6.2013, the Finance Act, 2013 amended the sub-section (1D) of section
206C as follows:
for sale of bullion {*omission} or jewellery, shall at the time of receipt of such amount
in cash, collect from the buyer, a sum equal to one per cent of sale consideration as
income-tax, if such consideration,—
(ii) for jewellery, exceeds five hundred thousand rupees.
{* omitted - excluding any coin or any article weighing ten grams of less}
From the speech of

Hon’ble Minister of Finance Sh. Arun Jaitly
on Union Budget, 2016
18. Now, w.e.f. 1.6.2016, the Finance Act, 2016 has again amended to enlarge the scope of
TCS, the objectives of which are spelled out as follows:
149. I also propose to collect tax at source at the rate of 1% on purchase of luxury cars
exceeding value of Rs. ten lakh and purchase of goods and services in cash exceeding
Rs. two lakh. For compliant tax payers with resources, -
 this levy not only advances collection of tax when the expenditure is
incurred,
 but it provides data to the tax authorities to identify the persons who incur
such expenditure, but may be missing from the tax base.
Farmers and notified class of persons will have an option of giving a form by
which TCS will not be charged.
Comments
 Through these measures the Government intends to advance the collection

and also to keep trail of non files involved in high value the transactions.
Memorandum explaining the proposed amendment vide Finance Bill, 2016

C. Widening of Tax Base and Anti Abuse Measures
{Tax Collection at Source (TCS) on sale of vehicles; goods or services}
Cont…..9
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19. The memorandum explaining the amendment is as follows:
The existing provision of section 206C of the Act, inter alia, provides that the seller
shall collect tax at source at specified rate from the buyer at the time of sale of specified
items such as –
 alcoholic liquor for human consumption,
 tendu leaves,
 scrap,
 mineral being coal or lignite or iron ore,
 bullion etc. in cash exceeding two lakh rupees.
In order to
 reduce the quantum of cash transaction in sale of any goods and services and
 for curbing the flow of unaccounted money in the trading system and
 to bring high value transactions within the tax net,
it is proposed to amend the aforesaid section to provide that -
 the seller shall collect
 the tax at the rate of one per cent
 from the purchaser
 on sale of motor vehicle of the value exceeding ten lakh rupees and
 sale in cash of any goods (other than bullion and jewellery), or
 providing of any services (other than payments on which tax is deducted at source
under Chapter XVII-B)
 exceeding two lakh rupees.
It is also proposed to provide that the sub-section (1D) relating to TCS in relation to sale
of any goods (other than bullion and jewellery) or services shall not apply to certain class
of buyers who fulfill such conditions as may be prescribed.
This amendment will take effect from 1st June, 2016.

Section 206C(1E) and (IF) inserted by the Finance Act, 2016
{w.e.f 1.6.2016}
20. Thus, w.e.f. 1.6.2016, the Finance Act, 2016 has amended the sub-section (1D) of
section 206C as follows and has inserted two new sub-section (1E) and (1F) as follows,
besides other amendments in section 206C:
for sale of bullion or jewellery or any other goods (other than bullion or jewellery) or
providing any service, shall, at the time of receipt of such amount in cash, collect from
the buyer, a sum equal to one per cent of sale consideration as income-tax, if such
consideration,—
Cont…..10
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(ii) for jewellery, exceeds five hundred thousand rupees; or
(iii) for any goods, other than those referred to in clause (i) and (ii), or any
service, exceeds two hundred thousand rupees.
Provided that no tax shall be collected at source under this sub-section on any
amount on which tax has been deducted by the payer under Chapter XVII-B.
(1E) Nothing contained in sub-section (1D) in relation to sale of any goods (other than
bullion or jewellery) or providing any service shall apply to such class of buyers who
fulfill such conditions, as may be prescribed.”;
(1F) Every person, being a seller, who receives any amount as consideration for sale of
a motor vehicle of the value exceeding ten lakh rupees, shall at the time of receipt of
such amount, collect from the buyer, a sum equal to one per cent of the sale
consideration as income-tax.
Comments
21. From the above it is clear that the consistent thrust of the Government has been -
a. to deter generation and use of unaccounted money;
b. to curb the flow of unaccounted money in the trading system of -
i. bullion and
ii. jewellery;
c. to curb the flow of unaccounted money in the trading system;
d. to reduce the quantum of cash transaction in –
i. bullion and
ii. jewellery sector;
e. to reduce the quantum of cash transaction in sale of any -
i. goods and
ii. services;
f. to bring high value transactions within the tax net,
22. The Government believes that unaccounted money is generated and used in the shape of
‘cash’ and it is difficult to establish trail of the same.
23. Therefore, to discourage use of cash in transactions of –

a. purchase of bullion for consideration exceeding Rs. 2 lakh;
b. purchase of jewellery for consideration exceeding Rs. 5 lakh;
c. purchase of any goods for consideration exceeding Rs. 2 lakh; and
d. purchase of any services for consideration exceeding Rs. 2 Lakh;
and
Cont…..11
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e. to mobalize additional resources from effluent class of the society, e.g. TCS on
purchase and sale of vehicle of value exceeding Rs. 10 Lakh; and
f. to gather information regarding high value purchases of certain goods and
services, including luxury motor vehicle so that the same is matched with their
sources of income
section 206C has been amended in the aforesaid manner.
24. It means that the Government wants to have details of aforesaid high value transactions
and the transactions in which cash is involved. Through this measure the Government
shall not only mop up additional revenue by ‘TCS’ but shall also be able to gather
information and details of the buyers who are involved in such transactions, to verify
whether they are using accounted money or unaccounted money for such transactions.
25. Section 206C under Chapter XVII-BB of the Income Tax Act, 1961 provides such
mechanism.
26. Section 206C which was introduced by the Finance Act, 1988 w.e.f 1.6.1988 has been
amended from time to time in accordance with the policies of the Government. It runs
from section (1) to Section (11), which provides a complete code.
27. Text of section 206C {as amended by the Finance Act, 2016 w.e.f 1.6.2016} is as
follows:
Chapter XVII-BB - Collection at source

Section : 206C
Profits and gains from the business of trading in alcoholic liquor, forest produce, scrap, etc.
206C. {As amended by the Finance Act, 2016 w.e.f 1.6.2016}
TCS in relation to goods specified in the ‘Table’ in sub-section (1)

{the entries are seven in No(s) and goods are nine in No(s)}
(1) Every person, being a seller shall, at the time of debiting of the amount payable by the
buyer to the account of the buyer or at the time of receipt of such amount from the said buyer
in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, collect
from the buyer of any goods of the nature specified in column (2) of the Table below, a sum
equal to the percentage, specified in the corresponding entry in column (3) of the said Table, of
such amount as income-tax:
Cont…..12
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Table
.Sl. Nature of goods Percentage
No.
(i) Alcoholic Liquor for human consumption One per cent
(ii) Tendu leaves Five per cent
(iii) Timber obtained under a forest lease Two and one-half per cent
(iv) Timber obtained by any mode other than under a forest lease Two and one-half per cent
(v) Any other forest produce not being timber or tendu leaves Two and one-half per cent
(vi) Scrap One per cent
(vii) Minerals, being coal or lignite or iron ore One per cent
Provided that every person, being a seller shall at the time, during the period beginning on
the 1st day of June, 2003 and ending on the day immediately preceding the date on which
the Taxation Laws (Amendment) Act, 2003 comes into force {8.9.2003}, of debiting of the
amount payable by the buyer to the account of the buyer or of receipt of such amount from the
said buyer in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier,
collect from the buyer of any goods of the nature specified in column (2) of the Table as it stood
immediately before the 1st day of June, 2003, a sum equal to the percentage, specified in the
corresponding entry in column (3) of the said Table, of such amount as income-tax in accordance
with the provisions of this section as they stood immediately before the 1st day of June, 2003.
Declaration for ‘nil’ TCS

{Rule 37C, Form No. 27C}
(1A) Notwithstanding anything contained in sub-section (1), no collection of tax shall be

made in the case of a buyer, who is resident in India, if such buyer furnishes to the person
responsible for collecting tax, a declaration in writing in duplicate in the prescribed form and
verified in the prescribed manner to the effect that the goods referred to in column (2) of the
aforesaid Table are to be utilised for the purposes of manufacturing, processing or producing
articles or things or for the purposes of generation of power and not for trading purposes.
(1B) The person responsible for collecting tax under this section shall deliver or cause to be
delivered to the Principal Chief Commissioner or Chief Commissioner or Principal
Commissioner or Commissioner one copy of the declaration referred to in sub-section (1A) on
or before the seventh day of the month next following the month in which the declaration is
furnished to him.
Cont…..13
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Comment
 A declaration may be filed by a buyer, who is resident in India.
 Such declaration is to be filed in under rule 37C in Form No. 27C.
 Such declaration is to be filed for claiming ‘nil’ TCS under sub-section (1).
 Such declaration can be filed only in respect of goods mentioned in the ‘table’
provided in sub-section (1), which are seven in serial No(s) and nine in No(s).
 Such declaration cannot be filed if the buyer obtains such goods for trading
purposes.
 Such declaration can be filed if the buyer obtains such goods either of the following
purposes:
o manufacturing of articles of things, or
o processing of articles or things, or
o producing articles of things, or
o generation of power.
 It means that such declaration cannot be filed for the purposes of –
o sub-section (1C)
o sub-section (1D)
o sub-section (1F)
TCS in relation to parking lot, toll plaza, mine and quarry

{the entries are three in No(s) and facilities are four in No(s)}
(1C) Every person, who grants a lease or a licence or enters into a contract or otherwise
transfers any right or interest either in whole or in part in any parking lot or toll plaza or mine
or quarry, to another person, other than a public sector company (hereafter in this section
referred to as "licensee or lessee") for the use of such parking lot or toll plaza or mine or
quarry for the purpose of business shall, at the time of debiting of the amount payable by the
licensee or lessee to the account of the licensee or lessee or at the time of receipt of
such amount from the licensee or lessee in cash or by the issue of a cheque or draft or by any
other mode, whichever is earlier, collect from the licensee or lessee of any such licence,
contract or lease of the nature specified in column (2) of the Table below, a sum equal to the
percentage, specified in the corresponding entry in column (3) of the said Table, of such
amount as income-tax:
Table
Sl. No. Nature of goods Percentage
(i) Parking lot Two per cent
(ii) Toll Plaza Two per cent
(iii) Mining and quarrying Two per cent
Cont…..14
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Explanation 1.— For the purposes of this sub-section, "mining and quarrying" shall not include
mining and quarrying of mineral oil.
Explanation 2.— For the purposes of Explanation 1, "mineral oil" includes petroleum and
natural gas.
TCS on purchase & sale of specified goods or services of consideration exceeding Rs.
2,00,000/- if any part of such consideration is paid in cash
{A move to discourage use of cash to deter generation and use of unaccounted money}
(1D) Every person, being a seller, who receives any amount in cash as consideration for sale
of bullion or jewellery or any other goods (other than bullion or jewellery) or providing any
service, shall, at the time of receipt of such amount in cash, collect from the buyer, a sum
equal to one per cent of sale consideration as income-tax, if such consideration,—
(ii) for jewellery, exceeds five hundred thousand rupees; or
(iii) for any goods, other than those referred to in clause (i) and (ii), or any service,
exceeds two hundred thousand rupees.
Provided that no tax shall be collected at source under this sub-section on any amount
on which tax has been deducted by the payer under Chapter XVIIB.
Enabling CBDT to make rules for granting exemption for sub-section (1D)
{A move to provide relief from TCS to specified class of buyers}
(1E) Nothing contained in sub-section (1D) in relation to sale of any goods (other than bullion
or jewellery) or providing any service shall apply to such class of buyers who fulfill such
conditions, as may be prescribed.;
TCS on Motor Vehicles of value exceeding Rs. 10,00,000/-

{A move to mobilize the resources and advancing the tax collection and collecting data}
(1F) Every person, being a seller, who receives any amount as consideration for sale of a
motor vehicle of the value exceeding ten lakh rupees, shall at the time of receipt of such
amount, collect from the buyer, a sum equal to one per cent of the sale consideration as
income-tax.
Cont…..15
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Mode of recovery
(2) The power to recover tax by collection under sub-section (1) or sub-section (1C) or
sub-section (1D) shall be without prejudice to any other mode of recovery.
28. It may be noted that sub-section (1F) is missing in the aforesaid sub-section (2), which
relates to powers to recover TCS without prejudice to any other mode of recovery. This
omission seems to be unintentional, because TCS under sub-section (1F) also can be
collected without prejudice to any other mode of recovery.
29. This omission needs to be addressed to competent authorities for necessary correction.
Payment of TCS and furnishing of quarterly statement of TCS

{Rule 37CA(1) & (2) - Payment}
{Rule 31AA(1), Form No. 27EQ - Statement}
{Rule 31AA(3)(i)(c), Form No. 27A - Statement}
(3) Any person collecting any amount under sub-section (1) or sub-section (1C) or sub-section
(1D) shall pay within the prescribed time the amount so collected to the credit of the Central
Government or as the Board directs:
Provided that the person collecting tax on or after the 1st day of April, 2005 in accordance
with the foregoing provisions of this section shall, after paying the tax collected to the credit of
the Central Government within the prescribed time, prepare such statements for such period as
may be prescribed and deliver or cause to be delivered to the prescribed income-tax authority,
or the person authorised by such authority, such statement in such form and verified in such
manner and setting forth such particulars and within such time as may be prescribed.
Comment
30. It may be noted that sub-section (1F) is missing in the main provision of aforesaid
sub-section (3), which relates to time of payment of TCS collected. This omission seems
to be unintentional, because TCS once collected has to be paid.
TCS quarterly statement where the collector is an office of the Government
(3A) In case of an office of the Government, where the amount collected under sub-section (1)
or sub-section (1C) or sub-section (1D) has been paid to the credit of the Central Government
without the production of a challan, the Pay and Accounts Officer or the Treasury Officer or the
Cheque Drawing and Disbursing Officer or any other person, by whatever name called, who is
Cont…..16
: 16 :
responsible for crediting such tax to the credit of the Central Government, shall deliver or cause
to be delivered to the prescribed income-tax authority, or to the person authorised by such
authority, a statement in such form, verified in such manner, setting forth such particulars and
within such time as may be prescribed.
TCS correction statement
(3B) The person referred to in the proviso to sub-section (3) may also deliver to the prescribed
authority under the said proviso, a correction statement for rectification of any mistake or to
add, delete or update the information furnished in the statement delivered under the said proviso
in such form and verified in such manner, as may be specified by the authority.
Credit of TCS
{Rule 37-I}
(4) Any amount collected in accordance with the provisions of this section and paid to the credit
of the Central Government shall be deemed to be a payment of tax on behalf of the person from
whom the amount has been collected and credit shall be given to such person for the amount
so collected in a particular assessment year in accordance with the rules as may be prescribed
by the Board from time to time.
Issue of TCS certificate and statement in Form No. 26AS

{Rule 37D, Form No. 27D - Certificate}
{Rule 31AB, Form No. 26AS – Statement of Tax to be maintained by AO}
(5) Every person collecting tax in accordance with the provisions of this section shall within such
period as may be prescribed from the time of debit or receipt of the amount furnish to the
buyer or licensee or lessee to whose account such amount is debited or from whom such
payment is received, a certificate to the effect that tax has been collected, and specifying the
sum so collected, the rate at which the tax has been collected and such other particulars as
may be prescribed.
Provided that the prescribed income-tax authority or the person authorised by such authority
referred to in sub-section (3) shall, within the prescribed time after the end of each financial year
beginning on or after the 1st day of April, 2008, prepare and deliver to the buyer referred to
in sub-section (1) or, as the case may be, to the licensee or lessee referred to in sub-section
(1C), a statement in the prescribed form specifying the amount of tax collected and such other
particulars as may be prescribed.
Cont…..17
: 17 :
Comment
32. It may be noted that sub-section (1D) and (1F) are missing in the proviso to aforesaid
sub-section (5). These omissions seems to be unintentional, because like other amounts
of TCS collected and paid. TCS collected under sub-sections (1D) and (1F) needs to be
reported in Form No. 26AS .
TCS return where tax collected before 1.4.2005
(5A) Every person collecting tax before the 1st day of April, 2005 in accordance with the
provisions of this section shall prepare within the prescribed time after the end of each financial
year, and deliver or cause to be delivered to the prescribed income-tax authority or such other
authority or agency as may be prescribed such returns in such form and verified in such manner
and setting forth such particulars and within such time as may be prescribed :
Provided that the Board may, if it considers necessary or expedient so to do, frame a scheme for
the purposes of filing such returns with such other authority or agency referred to in this sub-
section.
(5B) Without prejudice to the provisions of sub-section (5A), any person collecting tax, other
than in a case where the seller is a company, the Central Government or a State Government,
may at his option, deliver or cause to be delivered such return to the prescribed income-tax
authority in accordance with such scheme as may be specified by the Board in this behalf, by
notification in the Official Gazette, and subject to such conditions as may be specified therein, on
or before the prescribed time after the end of each financial year, on a floppy, diskette, magnetic
cartridge tape, CD-ROM or any other computer readable media (hereinafter referred to as the
computer media) and in the manner as may be specified in that scheme:
Provided that where the person collecting tax is a company or the Central Government or a State
Government, such person shall, in accordance with the provisions of this section, deliver or
cause to be delivered, within the prescribed time after the end of each financial year, such
returns on computer media under the said scheme.
(5C) Notwithstanding anything contained in any other law for the time being in force, a return
filed on computer media shall be deemed to be a return for the purposes of sub-section (5A)
and the rules made there under and shall be admissible in any proceedings made there-under,
without further proof of production of the original, as evidence of any contents of the original or
of any facts stated therein.
(5D) Where the Assessing Officer considers that the return delivered or caused to be delivered
under sub-section (5B) is defective, he may intimate the defect to the person collecting tax and
Cont…..18
: 18 :
give him an opportunity of rectifying the defect within a period of fifteen days from the date of
such intimation or within such further period which, on an application made in this behalf, the
Assessing Officer may, in his discretion, allow; and if the defect is not rectified within the said
period of fifteen days or, as the case may be, the further period so allowed, then, notwithstanding
anything contained in any other provision of this Act, such return shall be treated as an invalid
return and the provisions of this Act shall apply as if such person had failed to deliver the return.
Person responsible shall remain liable towards the Central Government
(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).
Defaulting Collector shall be deemed to be in default

{Rule 37, Form 27BA – Certificate by CA}
(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 sub-section (1D), 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 —
(i) has furnished his return of income under section 139;
(ii) has taken into account such amount for computing income in such return of income; and
(iii) 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:
Provided further that 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.
Comment
34. The provisions of the first proviso to sub-section (6A) are similar to the provisions of the
proviso to section 201(1) {as inserted by the Finance Act, 212 w.e.f 1.7.2012}.
Cont…..19
: 19 :
35. However, the provisions of the first proviso to sub-section (6A) are not applicable to any
person who is a collector (person responsible to collect tax) for the purposes of
sub-section (1D).
Simple interest on TCS
(7) Without prejudice to the provisions of sub-section (6), if the person responsible for collecting
tax does not collect the tax or after collecting the tax fails to pay it as required under this
section, he shall be liable to pay simple interest at the rate of one per cent per month or part
thereof on the amount of such tax from the date on which such tax was collectible to the date
on which the tax was actually paid and such interest shall be paid before furnishing the quarterly
statement for each quarter in accordance with the provisions of sub-section (3):
Provided that in case any person, other than a person referred to in sub-section (1D),
responsible for collecting tax in accordance with the provisions of this section, 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 but is not deemed to be an
assessee in default under the first proviso of sub-section (6A), the interest shall be payable
from the date on which such tax was collectible to the date of furnishing of return of income by
such buyer or licensee or lessee.
TCS collected but not paid has charge on all assets of the Collector
(8) Where the tax has not been paid as aforesaid, after it is collected, the amount of the tax
together with the amount of simple interest thereon referred to in sub-section (7) shall be a
charge upon all the assets of the person responsible for collecting tax.
Certificate by AO for TCS at lower rate

{Rule 37G, Form No. 13 - Application}
{Rule 37H- Certificate}
(9) Where the Assessing Officer is satisfied that the total income of the buyer or licensee or
lessee justifies the collection of the tax at any lower rate than the relevant rate specified in
sub-section (1) or sub-section (1C) or sub-section (1D), the Assessing Officer shall, on an
application made by the buyer or licensee or lessee in this behalf, give to him a certificate for
collection of tax at such lower rate than the relevant rate specified in sub-section (1) or
sub-section (1C) or sub-section (1D).
(10) Where a certificate under sub-section (9) is given, the person responsible for collecting the
tax shall, until such certificate is cancelled by the Assessing Officer, collect the tax at the rates
specified in such certificate.
Cont…..20
: 20 :
(11) The Board may, having regard to the convenience of assessees and the interests of revenue,
by notification in the Official Gazette, make rules specifying the cases in which, and the
circumstances under which, an application may be made for the grant of a certificate under sub-
section (9) and the conditions subject to which such certificate may be granted and providing
for all other matters connected therewith.
Comment
36. An application for obtaining a certificate u/s 206C(9)/(10)/(11) can be filed and such
certificate can be obtained by a buyer covered under-
a. sub-section (1)
b. sub-section (1C)
c. sub-section (1D)
37. Such application cannot be filed by a buyer covered under sub-section (1F) and no such
certificate be issued by AO for the buyer covered under sub-section (1F).
Explanation.— For the purposes of this section,—

(a) "accountant" shall have the meaning assigned to it in the Explanation to sub-section (2)
of section 288;
(aa) "buyer" with respect to —

(i) sub-section (1) means a person who obtains in any sale, by way of auction,
tender or any other mode, goods of the nature specified in the Table in sub-
section (1) or the right to receive any such goods but does not include,—
(A) a public sector company, the Central Government, a State Government,

and an embassy, a High Commission, legation, commission, consulate and
the trade representation, of a foreign State and a club; or
(B) a buyer in the retail sale of such goods purchased by him for personal
consumption;
(ii) sub-section (1D) or sub-section (1F) means a person who obtains in any sale,
goods of the nature specified in the said sub-section;
(ab) "jewellery" shall have the meaning assigned to it in the Explanation to sub-clause (ii)
of clause (14) of section 2;
Cont…..21
: 21 :
(b) "scrap" means waste and scrap from the manufacture or mechanical working of
materials which is definitely not usable as such because of breakage, cutting up, wear
and other reasons;
(c) "seller" means the Central Government, a State Government or any local authority or
corporation or authority established by or under a Central, State or Provincial Act, or
any company or firm or co-operative society and also includes an individual or a
Hindu undivided family whose total sales, gross receipts or turnover from the business
or profession carried on by him exceed the monetary limits specified under clause (a) or
clause (b) of section 44AB during the financial year immediately preceding the
financial year in which the goods of the nature specified in the Table in sub-section (1)
or sub-section (1D) are sold or services referred to in sub-section (ID) are provided.
Comments with regards to Section 206C(1D) & (1F)

{Applicable w.e.f 1.6.2016}
Seller
38. As per sub-section (1D) and (1F) tax is to be collected by the “seller”. It means that the
“seller” is the person who is responsible for collecting tax at source.
39. As per clause (c) of the Explanation "seller" means -

a. the Central Government,
b. a State Government or
c. any local authority or
d. any corporation or
e. any authority established by or under a Central, State or Provincial Act, or
f. any company or
g. any firm or
h. any co-operative society and also includes
i. an individual or a Hindu undivided family whose total sales, gross receipts or
turnover from the business or profession carried on by him exceed the monetary
limits specified under clause (a) or clause (b) of section 44AB during the
financial year immediately preceding the financial year in which the goods of the
nature specified in the Table in sub-section (1) or sub-section (1D) are sold or
services referred to in sub-section (ID) are provided.
40. For the purpose of section 206C, in clause (c) of the Explanation, “seller” is defined to
comprise in its domain the aforesaid specific entities. If any entity is not mentioned
therein, it is outside the definition of “seller”, therefore, outside the scope of section
206C.
Cont…..22
: 22 :
41. It means that for the purposes of section 206C(1) and 206C(1D) –
a. a company;
b. a firm;
c. a co-operative society
are obliged to collect tax even if they are not liable for audit u/s 44AB(a) or
44AB(b).
42. However, in the case of –

a. Individual or
b. HUF
they shall be obliged to collect tax if they are liable for audit u/s 44AB(a) or 44AB(b)
during the financial year immediately preceding the financial year in which the goods
of the nature specified in the Table in sub-section (1) or sub-section (1D) are sold
or services referred to in sub-section (ID) are provided.
43. It means that for collecting tax at source u/s 206C(1) and 206C(1D) after 1.6.2016 and
for financial year 2016-17 the status of the ‘Individual’ and ‘HUF’ “seller” qua liability
for audit u/s 44AB(a) and 44AB(b) is to be tested for financial year 2015-16, i.e.
a. in the case of purchase and sale of goods (business) section 44AB(a) shall
apply and it is to be seen whether “total sales, gross receipts or turnover in such
business” exceeds Rs. One crore.
b. in the case of provision of service in the nature of business e.g. ‘business of

commissions agency’, ‘business of repairs and maintenance’ or any other activity
of providing services which are not in the nature of “profession”, section
44AB(a) shall apply and it is to be seen whether “total sales, gross receipts or
turnover from in business” exceeds Rs. One crore.
c. in the case of provision of service in the nature of “profession”, section

44AB(b) shall apply and it is to be seen whether “gross receipts” in such
profession exceeds Rs. Twenty five lakh {Rs. Fifty Lakh for FY 2016-17 relevant
for AY 2017-18}
44. It may be pertinent to note that for the purpose of TCS u/s 206C(1F) on sale of “motor
vehicle” w.e.f. 1.6.2016 “seller” does not include ‘Individual’ and ‘HUF’, since as per
clause (c) of Explanation to section 206C ‘Individual’ and ‘HUF’ are included in the
definition of “seller” only for the purpose of TCS u/s 206C(1) and 206C(1D), and not
for the purposes of section 206C(1F), wherein TCS on sale of “motor vehicle” is to be
made.
Cont…..23
: 23 :
45. In the above definition of “seller” besides company and firm “co-operative societies”
have also been included, which is defined u/s 2(19) of the Act to mean a co-operative
society registered under the Co-operative Societies Act, 1912 or any other law for the
time being in force in any State for the registration of co-operative societies. The
aforesaid definition of “seller” does not include –
 Trust
 Societies registered under Societies Registration Act, 1860.
 Association of Persons (AOP)
 Body of Individuals (BOI)
Therefore, it appears that aforesaid entities are not required to collect tax u/s 206C.
Buyer
46. Explanation to section 206C provides that - For the purposes of this section -
(aa) "buyer" with respect to —

(i) sub-section (1) means a person who obtains in any sale, by way of auction,
tender or any other mode, goods of the nature specified in the Table in
sub-section (1) or the right to receive any such goods but does not include,-
(A) a public sector company, the Central Government, a State

Government, and an embassy, a High Commission, legation,
commission, consulate and the trade representation, of a foreign
State and a club; or
(B) a buyer in the retail sale of such goods purchased by him for
personal consumption;
(ii) sub-section (1D) or sub-section (1F) means a person who obtains in any
sale, goods of the nature specified in the said sub-section;
47. As per sub-section (1D) and (1F) tax is to be collected from the buyer.
48. As per clause (aa) of the Explanation, for the purpose of sub-section (1D) and
sub-section (1F) “buyer” means a person who obtains in any sale, goods of the nature
specified in the said sub-section;
49. It may be noted that in aforesaid sub-clause (ii) expression “goods of the nature specified
in the said sub-section” is used.
Cont…..24
: 24 :
50. There seems to be drafting error in using “said sub-section” while referring to
sub-section (1D) and (1F). This expression should have been “said sub-sections”
51. As per above definition “buyer” is a person who -
 Obtains
 any goods
 of the nature
 specified in sub-section (1D)
 in
 any sale.
52. Use of word any before sale means ‘sale’ in any manner viz. –
 by way of direct sale;
 by way of auction;
 by way of tender;
 by way of e’commerce etc.
53. It is also significant to note that in contrast to ‘a buyer in the retail sale of goods
mentioned in sub-section (1) purchased by a person for personal consumption’
vide exclusionary sub-clause (ii) of clause (aa) of the Explanation, for the purposes of
sub-section (1D) and (1F), “buyer” would include a ‘a person who purchases any
goods in the retail sale of goods mentioned in sub-section (1D) and (1F) even for
personal consumption’.
54. As per above definition “buyer” is a person who “obtains” such goods in any sale.
Word “obtain” is neither defined in section 206C nor in the Income Tax Act, 1961.
dictionary meaning of the same is –
 to acquire;
 to procure;
 to get hold of;
 to take possession of;
 to secure
55. It may be relevant to refer to the definition of “buyer” u/s 2(1) of Sales of Goods Act,
1930, according to which “buyer means a person who buys or agrees to buy goods”.
56. The ‘converse’ of the “buyer” means a person who sells or agrees to sell goods”.
Cont…..25
: 25 :
57. The above is supported by section 2(13) the Sales of Goods Act, 1930 according to
which “seller” means a person who sells or agrees to sell goods;
58. In the above definition the expression “agrees to buy” goes with the word “secure”. It
means that when a buyer enters into a ‘contract of sale’ with a seller and ‘agree to buy
goods’ he becomes “buyer”, and if he makes any advance to the seller under such
contract of sale, such advance takes the colour of “consideration” for such sale as the
same is paid by such person as “buyer” to the “seller”. On the other hand the expression
“agrees to sell” indicates an undertaking from the seller to the buyer to perform the
contract of sale.
59. As per clause sub-clause (ii) of clause (aa) of the Explanation, defining “buyer” with
respect to sub-section (1F), TCS is to be made from a person who purchases the goods
of the nature specified in sub-section (1F), i.e. “motor vehicle”.
60. It means that no TCS is to be made under sub-section (1F) with respect to any goods
other then “motor vehicle”.
61. The word “value” used before exceeding Rs. 1000000/- refers to the “value of the
motor vehicle” and not of anything else e.g. accessories loaded on the vehicle, body
installed on the chassis of a ‘bus’ or ‘truck’ etc.
62. However, such accessories loaded on the vehicle or body installed on the chassis of a
‘bus’ or ‘truck’ etc. shall be covered by sub-section (1D), if its consideration exceeds
Rs. 200000/- and any part of it is received/paid in cash.
TCS u/s 206C(ID)
Single transaction
63. Tax is to be collected u/s 206C(1D) in relation to transaction of –

a. sale of bullion for amount exceeding Rs. 200000/-;
b. sale of jewellery for amount exceeding Rs. 500000/-;
c. sale of any goods for amount exceeding Rs. 200000/-
d. provision of any service for amount exceeding Rs. 200000/-;
e. sale of any goods and provision of any service for amount exceeding Rs. 200000/-
64. Section 206C(1D) applies in respect of single transaction of purchase/sale and service
because “consideration” refers to “sale” of (1) bullion, (2) jewellery, (3) any other
goods, (4) providing any service, where “sale” has been mentioned as ‘singular’.
Cont…..26
: 26 :
Incidence of TCS
65. The incidence which reasons TCS is the –

a. sale of any goods, or
b. provision of any service
66. The provisions of sub-section (1D) shall apply only when a seller receives any amount in
cash from buyer as consideration for sale of bullion, jewellery, any other goods or
services.
67. Before making TCS it is necessary to understand the meaning of following words for the
purpose of following words used in sub-section (1D), which are neither defined in the
said sub-section (1D) nor in the Income Tax Act, 1961:-
a. Sale;
b. Goods;
c. Service; and
d. Consideration
Sale
68. For making a sale a person must intend to buy goods and the other person must intend to
sell the same goods to such person, and for this they enter into “contract of sale”.
69. As per section 4(1) of the Sales of Goods Act, 1930 “a contract of sale of goods” is a
contract whereby the seller transfers or agrees to transfer the property in goods to the
buyer for a price.
70. Such price is in fact the consideration for sale.
71. As per section 2(10) of the Sales of Goods Act, 1930 “price” means the money
consideration for a sale of goods
72. As per section 4(3) of the Sales of Goods Act, 1930 when under a “contract of sale”
the property in the goods is transferred from the seller to the buyer, the contract is
called a sale.
73. But where the transfer of the property in the goods is to take place at a future time or
subject to some condition thereafter to be fulfilled, the contract is called an “agreement
to sell”.
74. As per section 4(3) of the Sales of Goods Act, 1930 an “agreement to sell” becomes a
sale when the time elapses or the conditions are fulfilled subject to which the property
in the goods is to be transferred.
Cont…..27
: 27 :
75. “Property in goods” means ownership of goods. Ownership of goods is different from
possession of goods, which means custody of goods When “property in goods” passes
from seller to buyer, it is called passing of property in goods.
76. As per the language employed in sub-section (1D) the ‘seller’ is obliged to collect tax
from ‘buyer’ at the time of receipt of such amount in cash.
77. “Such amount” refers to receipt of any amount in cash as consideration for sale.
78. Here “consideration” is used with the word “as” and expression “for sale”, which is
different from “of sale”.
79. Here, the use of the words “as” means “by way of”, which means that the amount
received by the seller in cash must be towards consideration for sale of –
a. bullion,
b. jewellery,
c. any goods
d. any service
and not otherwise. If any amount is received in cash or otherwise not as consideration
for sale e.g. loan, deposit, gift, capital or for any other obligation, then the provisions
of sub-section (1D) as well as sub-section (1F) {as similar words and expressions
have been used therein – except sans of cash} shall not apply.
80. Here, the words “for” as against “of” suggest the future sale. Therefore, such
consideration can be for sale which has taken place or which is yet to take place, but the
relationship between the payer and payee must be of ‘buyer’ and ‘seller’ under a
“contract of sale”.
81. Therefore, the incidence is sale of any goods or provision of any service. If any amount
is paid otherwise than as consideration for sale of any goods or provision of any
service, the provisions of sub-section (1D) shall not apply, e.g. receipt of any amount as
loan, deposit, capital, advance other than for sale or provision for service etc.
82. It is pertinent to note that the amendment in sub-section (1D) vide the Finance Act, 2016
is effective from 1.6.2016, therefore, the provisions of TCS shall apply to the transaction
of purchase and sale of any other goods (other than bullion and jeweler) and any service
where the “contract of sale” is entered into on or after 1.6.2016, because the tax is to be
collected when any amount of consideration is received in cash and such consideration
Cont…..28
: 28 :
must be for sale of goods or services. Therefore, before any such amount is received,
consideration must be present, and before consideration is decided there must be
“contract of sale” of goods and such consideration must be for sale of such goods or
services.
Goods
83. As per section 2(7) the Sales of Goods Act, 1930 “goods” means every kind of movable
property other than actionable claims and money; and includes stock and shares,
growing crops, grass, and things attached to or forming part of the land which are agreed
to be severed before sale or under the contract of sale;
84. Therefore, sub-section (1D) shall not apply to any amount received in cash which is
received as consideration for sale other than of goods e.g. –
a. immovable property being land or buildings;
b. actionable claims;
c. money.
85. It may not be out of place to mention that “motor vehicle” is a movable property and
“motor vehicle” of the value exceeding Rs. 10,00,000/- is covered by the provisions of
sub-section (1F). Therefore, “motor vehicle” of value exceeding Rs. 2,00,000/- and of
Rs. 10,00,000/- or less shall be covered by the provisions of sub-section (1D) if any part
of the consideration for its sale is received in cash.
86. As per clause (ab) of Explanation to section 206C for the purpose of section 206C
"jewellery" shall have the meaning assigned to it in the Explanation to sub-clause (ii)
of clause (14) of section 2. The same is as follows:
“Explanation 1.— For the purposes of this sub-clause, "jewellery" includes —
(a) ornaments made of gold, silver, platinum or any other precious metal or
any alloy containing one or more of such precious metals, whether or not
containing any precious or semi-precious stone, and whether or not
worked or sewn into any wearing apparel;
(b) precious or semi-precious stones, whether or not set in any furniture,

utensil or other article or worked or sewn into any wearing apparel.”
87. As per clause (b) of Explanation to section 206C for the purpose of section 206C
"scrap" means -
 waste and
 scrap
Cont…..29
: 29 :
from the
 manufacture or
 mechanical working of materials
which is definitely not usable as such because of
 breakage,
 cutting up,
 wear and
 other reasons.
88. TCS on “scrap” is provided in sub-section (1) of section 206C, and for the purpose of
section 206C “scrap” is defined as above. Therefore, any waste or scrap generated from
the manufacture or mechanical working of materials and which is definitely usable as
such for aforesaid reasons would attract TCS under sub-section (1).
89. However, any waste or scrap, which is not covered by the above definition, shall be
covered by the general meaning of “goods”, and thus would be covered under
sub-section (1D), subject to applicability other conditions provided therein.
90. Immovable property being land or buildings; actionable claims; money shall also not be
covered by the general meaning of “goods”, and thus would be outside the preview of
sub-section(1D).
Point (time) of TCS
91. In view of above interpretation the “Point of TCS” is the date when any amount of such
consideration is received by the seller from the buyer in cash if it is agreed between them
that such consideration would be more than the respective thresholds.
92. The expression “such amount” used between “shall, at the time of receipt of” and
“in cash” refers to “receives any amount in cash as consideration for sale”.
93. Therefore, the point of TCS shall be the time of receipt of any amount in cash as
consideration for sale, i.e. any amount out of the agreed consideration for sale.
94. No tax is to be collected u/s 206C(1D) in relation to any of the above transactions if
whole of the sale consideration is received by the seller by any mode otherwise than in
cash.
95. Tax is to be collected u/s 206C(1D) in relation to the above transactions if whole of the
sale consideration is received by the seller in cash.
Cont…..30
: 30 :
96. Tax is also to be collected u/s 206C(1D) in relation to the above transactions if -
 the seller
 receives
 any amount
 in cash
 as consideration
 for sale of –
o bullion or
o jewellery or
o any other goods (other than bullion or jewellery) or
o providing any service.
97. It means that if any amount out of such agreed consideration is received by the seller
from the buyer in advance in cash before the actual sale of such goods, i.e. before the
raising of sale invoice and delivery of such goods, the incidence and point of TCS would
arise under sub-section (1D) and accordingly tax shall be required to be deducted at that
point of time.
98. If any part of such consideration is received in cash prior to the actual sale/delivery of
goods, then tax to be collected on the entire sale consideration at the point of receipt of
such amount in cash.
99. If any part of such consideration is received otherwise than in cash prior to the actual
sale/delivery of goods, then no tax to be collected at that point of time.
100. If any part of such consideration is received in cash at the time of actual
sale/delivery of goods, then tax is to be collected at that point of time @ 1% of the entire
such consideration and not only of such cash component because the legislative intent
is to deter generation and use of unaccounted money being used in such transactions
and to keep trail of such high value transactions.
101. In this regards it may be pertinent to refer to the provisions of section 194-IA
{TDS on payment on transfer of certain immovable property other than
agricultural land} of the Act, wherein similar language is employed, the relevant
part of which reads as follows:
“any person, being a transferee, responsible for paying (other than the person
referred to in section 194LA) to a resident transferor any sum by way of
consideration for transfer of any immovable property (other than agricultural
land) shall, at the time of credit of such sum to the account of the transferor or at
Cont…..31
: 31 :
the time of payment of such sum in cash or by issue of a cheque or draft or by any
other mode, whichever is earlier, deduct an amount equal to one per cent of such
sum as income-tax thereon.”
102. It is the settled law of section 194-IA that wherever consideration for transfer of
any immovable property (other than agricultural land) exceeds Rs. 50 lakh, the
transferee is obliged to collect tax at source @ 1% of any sum received against
such consideration irrespective of the fact that transfer of such property has not
yet taken place. It means that tax is required to be deducted in respect of all and
any sum received even before the actual transfer of such property. TDS @ 1% is
to be made from such sum and from the entire consideration of transfer of
immovable property.
103. In both the provisions of section 206C(1D) and 194-IA following expressions are
common with variation as per context:
o buyer and seller vs. transferee and transferor;
o any amount in cash as consideration for sale vs. any sum by way of
consideration for transfer;
o such amount refers to any amount received in cash vs. such sum refers to
any sum paid or credited;
o consideration for sale vs. consideration for transfer.
104. Therefore, the point of collection of tax is the point of time when “such amount”
is received in cash. “Such amount” refers to “any amount” received in cash as
consideration for sale of such goods or any service.
Other aspects of section 206C(1D)
105. Tax is to be collected u/s 206C(1D) in relation to the above transactions –

o at the rate of 1%
o of
o sale consideration
o as income tax,
o if
o such consideration –
(i) for bullion, exceeds Rs. 200000/-; or
(ii) for jewellery, exceeds Rs. 500000/-; or
(iii) for any goods, other than those referred to in clause (i) and (ii), or any
service, exceeds Rs. 200000/-.
Cont…..32
: 32 :
106. Tax is to be collected @ 1% of sale consideration. The expression “a sum
equal to one per cent of sale consideration” neither refers to “such
consideration” nor “consideration in cash”. It refers to “sale consideration”,
which means the entire agreed sale consideration. Therefore, it appears that tax is
to be collected by applying the rate of 1% to the entire sale consideration.
107. It may be clarified that “such consideration” used after the word “if” refers to
the entire agreed consideration, and it further refers to the respective threshold.
Consideration
108. Since word “consideration” has been used repeatedly in sub-section (1D) as
well as in sub-section (1F), it is imperative to understand its meaning for the
purpose of these sub-sections.
109. In sub-section (1D) word “consideration” has been used in following manner:
o receives any amount in cash as consideration for sale;
o 1% of sale consideration;
o if such consideration
 for bullion, exceeds Rs. 200000/-; or
 for jewellery, exceeds Rs. 500000/-; or
 for any goods, other than those referred to in clause (i) and (ii), or any
service, exceeds Rs. 200000/-.
110. In sub-section (1F) word “consideration” has been used in following manner:
o receives any amount as consideration for sale of a motor vehicle;
o 1% of the sale consideration;
111. To illustrate, even in section 194-IA word “consideration” has been used in
following manner:
o wherever consideration for transfer of any immovable property (other than
agricultural land)
o 1% of any sum paid against such sum (consideration)
112. Word “consideration” is neither defined in section 206C nor in section 194-IA
and nor in the Income Tax Act, 1961.
113. In the context of purchase and sale of goods the provisions of the Sales of Goods
Act, 1930 are relevant. As per section 4(1) of “a contract of sale of goods” is a
contract whereby the seller transfers or agrees to transfer the property in goods
to the buyer for a price. Such price is in fact the consideration for sale. As per
Cont…..33
: 33 :
section 2(10) of the Sales of Goods Act, 1930 “price” means the money
consideration for a sale of goods. Since price has been used in relation to sale of
goods, therefore, it may also be relevant to refer to the definition of “sale price”
mentioned in laws relating to Tax/VAT/CST on sale of goods.
114. As per section 2(zd) of Delhi Value Added Tax Act, 2004 “sale price” means
the amount paid or payable as valuable consideration for any sale, including -
o (i) the amount of tax, if any, for which the dealer is liable under this Act;
o (v) amount of duties levied or leviable on the goods under the Central Excise
Act, 1944 or Customs Act, 1962 or the Delhi Excise Act, 2009 whether such
duties are payable by the seller or any other person.
115. As per section 2(h) of Central Sales Tax Act, 1956 “sale price” means the
amount payable to a dealer as consideration for the sale of any goods………. As
per section 8A of the CST Act, for the purpose of determination of ‘turnover’ of a
dealer for the purpose of CST Act, CST is required to be deducted from the ‘sale
price’ in accordance with the formula provided therein.
116. From the above provisions it is clear that “consideration” means any amount
paid or payable as price for the sale of goods, which would include all sort of
taxes levied or leviable in relation to such price. Therefore, for the purposes of
threshold for invoking
117. the provisions of TCS and for the purposes of collecting tax at source @ 1% such
price is to be considered being consideration. It may not also be out of place
mention that in sub-section (1F) tax is to be collected if value of motor vehicle
exceeds Rs. 1000000/-. Here the threshold of Rs. 1000000/- has been linked to
‘value’, which means the ‘price’ as explained above. Thus, here value, price and
consideration are synonymous.
TCS @ 1% of which consideration – significance of the word “the”
118. In sub-section (1D) tax is to be collected @ 1% of sale consideration and in

sub-section (1F) tax is to be collected @ 1% of the sale consideration. The use
of word “the” in sub-section (1F) makes the difference. “The” is s definite
article which is used, especially before a noun, with a specifying effect. In sub-
section (1F) use of “the” before sale consideration means “sales consideration”
mentioned before in the said sub-section (1F), which is, “any amount
received as consideration for sale of motor vehicle of value exceeding Rs.
1000000/-“. It means that if any amount has been received in advance towards
such consideration, it shall be subjected to TCS. In sub-section (1D) absence of
Cont…..34
: 34 :
the word “the” in expression “@ 1% of sale consideration” means that it is not
referring to any specific consideration or previously mentioned consideration. It
is simply referring to consideration for sale of goods etc., i.e. the entire agreed
consideration. Therefore, it appears that under sub-section (1D) TCS is to be
made on the entire consideration for sale whenever any part of such consideration
is received in cash.
119. Keeping in view the objectives sought to be achieved through this provision, it
appears that tax is to be collected u/s 206C(1D) in relation to the above
transactions if following conditions are fulfilled –
o sale consideration of “a” transaction of sale of such goods or provision of

service exceeds the respective threshold provided; and
{such consideration in relation to the thresholds refers to the sale
consideration of a transaction of sale of such goods or provision of service}
o any part of such sale consideration is received in cash; and

{any amount as consideration refers to part of the sale consideration of a
transaction of sale of such goods or provision of service}
120. Again keeping in view the objectives sought to be achieved through this
provision, it appears that tax is to be collected u/s 206C(1D) in relation to the
above transactions on whole of the “sale consideration” if any amount of such
consideration is received in cash. The sub-section does not speak of TCS on the
cash component of the sale consideration. It simply says “1% of sale
consideration”, subject to the condition that any amount of the consideration is
received in cash. This has been so provided perhaps to discourage involvement
of cash in high value transactions of purchase and sale of bullion, jewellery and
goods, and provision of services.
121. Logically, TCS should be made only on cash component of the sale consideration,
but the intention of the Government is to deter the use of cash in such
transactions and to gather information of such high value transactions in
which to any extent cash is involved.
o This law will apply to medical/hospital services also where payments are
largely made in cash. In such case it is advisable if w.e.f. 1.6.2016 payments
are made through ‘Debit Card’ or ‘Credit Card’ or ECS (RTGS / NEFT etc.).
122. But it may not be out of place to mention that u/s 285BA r/w rule 114E {Serial
No. 4} payments made by any person of an amount aggregating to Rs. 10 lakh or
more by any mode other than in cash against bills raised in respect of one or
more credit cards issued to that person in a financial year are obliged to be
reported by the person issuing such credit cards in “annual statement of
financial transactions” {earlier it was known as AIR}.
Cont…..35
: 35 :
123. Similarly u/s 285BA r/w rule 114E {Serial No. 11} receipt of cash payment
exceeding Rs. 2 lakh for sale by any person {who is liable for audit u/s 44AB of
the Act} of goods or services of any nature (other than those specified at serial
No. 1 to 10 of Rule 114E, if any) is to be reported by the person receiving such
payment in “annual statement of financial transactions” {earlier it was known as
AIR}. As per sub-rule (3) of rule 114E the reporting person mentioned in
column (3) of the Table under sub-rule (2) (other than the person at Sl. No. 9)
shall, while aggregating the amounts for determining the threshold amount
for reporting in respect of any person as specified in column (2) of the said
Table,-
(a) ……….
(b) aggregate all the transactions of the same nature as specified in column (2)
of the said Table recorded in respect of that person during the financial
year;
124. It may also not be out of place to mention that u/s 139A(5)(c) r/w rule 114B
Permanent Account Number (PAN) of buyer and seller are required to be quoted
in all documents pertaining to purchase and sale of any goods or services of an
amount exceeding Rs. 2 lakh and u/r 114C the seller is obliged to verify the PAN
of both the parties.
125. It means that under the law, wherever the consideration in transaction of purchase
and sale or provision of any service exceeds Rs. 2 lakh, the parties to the
transaction are obliged to intimate, provide and quote their so received PAN in the
documents pertaining to such transactions, which may be used for the purpose of
compliance u/s 206C.
126. No tax shall be collected at source u/s 206C(1D) on any amount on which tax has
been deducted by the payer under Chapter XVII-B, e.g. –
a. TDS u/s 194J on professional services;
b. TDS u/s 194J on technical services;
c. TDS u/s 194J on any remuneration or fees or commission by whatever name
called, other than those on which tax is deductible u/s 192, to a director of a
company;
d. TDS u/s 194H on services in the nature of commission;
e. TDS u/s 194H on services in the nature of brokerage;
f. TDS u/s 194C on services in the nature of -
1. carrying out any work in pursuance of a contract;
2. supply of labour for carrying out any work in pursuance of a
contract;
3. carriage of goods by any mode of transport other than by railways
in pursuance of a contract;
Cont…..36
: 36 :
4. advertising in pursuance of a contract;
5. broadcasting in pursuance of a contract;
6. telecasting in pursuance of a contract;
7. production of programmes for such broadcasting in pursuance of a
contract;
8. production of programmes for such telecasting in pursuance of a
contract;
9. carriage of passengers by any mode of transport other than by
railways in pursuance of a contract;
10. catering in pursuance of a contract;
11. manufacturing or supplying a product according to the requirement
or specification of customer by using material purchased from such
customer
12. in pursuance of a contract (but does not include manufacturing or
supplying a product according to the requirement or specification
of customer by using material purchased from a person, other than
such customer)
g. TDS u/s 194-IA on consideration for transfer of any immovable property (other
than agricultural land).
h. TDS u/s 195 in the case of deductee being no-resident and foreign companies.
TCS u/s 206C(IF)
127. Tax is to be collected u/s 206C(1F) in relation to the transaction of –

o sale of “a” motor vehicle of the value exceeding Rs. 1000000/-.
128. Tax is to be collected u/s 206C(1F) in relation to the above transactions at the
time of receipt of any amount as consideration for sale.
129. Tax is to be collected u/s 206C(1F) in relation to the above transactions –

o at the rate of 1%
o of
o sale consideration
o as income tax,
130. It is important to note that tax is to be collected u/s 206C(1F) at the time when
any amount is received as consideration for sale of such motor vehicle. It
means that if such amount of consideration is received in part, then tax is to be
collected at the time of receipt of such part consideration.
Cont…..37
: 37 :
131. If any amount is received as advance before raising of sale invoice for the sale of
a “motor vehicle”, such amount of advance is to be subjected to TCS u/s
206C(1F) as the same received as consideration for sale.
132. It is interesting to note that in the ‘budget speech’ Hon’ble Minister of Finance
had mentioned ‘Luxury Car’, however in section 206C(1F) “Motor vehicle” is
mentioned, which is not defined under the Income tax Act, 1961.
133. However, section 2(28) of the Motor Vehicle Act, 1988 defines the term “Motor
Vehicle”, according to which "motor vehicle" or "vehicle" means -
o any mechanically propelled vehicle adapted for use upon roads whether the
power of propulsion is transmitted thereto from an external or internal source
and
includes
o a chassis to which a body has not been attached and
o a trailer;
{as per section 2(46) “trailer” means any vehicle, other than -
 a semi-trailer and
 a side-car
drawn or intended to be drawn by a motor vehicle}
{as per section 2(39) “semi-trailer” means a vehicle not mechanically
propelled (other than a trailer), which is intended to be connected to a motor
vehicle and which is so connected that a portion of it is super-imposed on,
and a part of whose is borne by the motor vehicle}
but does not include :
o a vehicle running upon fixed rails or
o a vehicle of a special type adapted for use –
 only in a factory or
 in any other enclosed premises or
o a vehicle having less than four wheels fitted with engine capacity of not
exceeding twenty-five cubic centimeters.
134. A buyer covered under sub-section (1F) shall not be allowed to file an
application to AO u/s 206C(9) for issue of certificate for prescribing lower rate
for TCS. Such certificate can be issued only for the purposes of following sub-
sections:
i. sub-section (1)
ii. sub-section (1C)
iii. sub-section (1D)
Cont…..38
: 38 :
CBDT empowered to relax provision of section 206C(ID)
135. Section 206C(1E) has been inserted w.e.f 1.6.2016 to provides that nothing
contained in sub-section (1D) in relation to sale of any goods (other than bullion
or jewellery) or providing any service shall apply to such class of buyers who
fulfill such conditions, as may be prescribed.
136. It is a wise enactment vide which in case of hardship to any class of buyers of
goods or services, instead of waiting for amendment in the Act, CBDT can take
care of the same and accordingly may frame appropriate rules for the same. Thus,
section 206C(1E) is an enabling provision to make rules to give relief to any class
of buyers.
137. However, such rules can be made only –

o in relation to sale of any goods (other than bullion or jewellery)
o in relation to provision of any service
o subject to fulfillment of prescribed conditions.
138. Therefore, if any class if buyers feel hardship in this regard, they can represent to
CBDT to relax the provisions of section 206C(1D) by making rules u/s 2(33) r/w
section 295 of the Act.
139. In the budget speech, Hon’ble Minister of Finance has stated that “farmers and
notified class of persons will have an option of giving a form by which TCS will
not be charged”.
140. However, the CBDT cannot make rules in relation to ‘bullion’ and ‘jewellery’ to
provide any relief from the provisions of section 206C(1D).
141. However, the CBDT can make rules under sub-section (1E) for any class of
persons subject to conditions as may be prescribed.
CBDT Circular No. 22/2016 dated 8.6.2016
Section 206C of the Income-tax Act, 1961 (hereafter referred to as 'Act'), prior to
amendment by Finance Act, 2016. provided that the seller shall collect tax at source at
specified rate from the buyer at the time of sale of specified items such as alcoholic liquor
or human consumption, tender leaves, mineral being coal or lignite or iron ore etc. It also
provided for collection of tax at source at the rate of one per cent on sale in cash of
bullion exceeding 2 1akh rupees and jewellery exceeding 5 lakh rupees. In order to
reduce the cash transactions in sale of goods and services, Finance Act 2016
Cont…..39
: 39 :
has expanded the scope of section 206C (ID) to provide that the seller shall collect tax at
the rate of one per cent from the purchaser on sale in cash of any goods (other than bullion
and jewellery) or providing of any services (other than payment on which tax is deducted at
source under Chapter XVII-B) exceeding two lakh rupees. So far as sale of jewellery and
bullion is concerned, the provisions of sub-section (1D) of section 206C prior to its
amendment by the Finance Act, 2016 shall continue to apply. Further, with a view to bring
high value transactions within the tax net, it has been provided in sub-section (1F) of
section 206C of the Act that the seller who receives consideration for sale of a motor vehicle
exceeding ten lakh rupees, shall collect one per cent of the sale consideration as tax from
the buyer. Any person who obtains in any sale, the goods of the nature specified in sub-
section (ID) or (1F) of section 206C is a buyer. The seller for the purposes of collection of
tax under section 206C shall be -
(i) A Central Government or a state Government,
(ii) Any local authority, or corporation or authority established under any Central,
State or Provincial Act,
(iii) Any company, firm or cooperative society,
(iv) An individual or Hindu undivided family who is liable to audit as per provisions
of section 44AB during the financial year immediately preceding the financial year
in which the goods are sold or the services arc provided.
The amendments brought in section 206C by Finance Act, 2016 are applicable form lst
June 2016.
In this regard a number of queries have been received about the scope of the provisions
and the procedure to be followed. The board has considered the same and decided to
clarify the points raised by issue of a circular in the form of questions and answers as
follows:
Question 1: Whether tax collection at source (TCS) at the rate of 1 % is on sale of

Motor Vehicle at retail level or also on sale of motor vehicles by manufacturers to
dealers/distributors,
Answer : To bring high value transactions within the tax net, section 206C of the Act has
been amended to provide that the seller shall collect the tax at the rate of one per cent
from the purchaser on sale of motor vehicle of the value exceeding ten lakh rupees, This
is brought to cover all transactions of retail sales and accordingly it will not apply on
sale of motor vehicles by manufacturers to dealers/distributors,
Question 2: Whether TCS at the rate of 1 % is on sale of Motor Vehicle is applicable

only to Luxury Cars?
Cont…..40
: 40 :
Answer : No. As per sub section (IF) of Section 206C of the Act the seller shall collect
the tax at the rate of one per cent from the purchaser on sale of any motor vehicle of the
value exceeding ten lakh rupees,
Question 3: Whether TCS at the rate of 1% is applicable in the case of sale to

Government Departments, Embassies, Consulates and United Nation Institutions for sale
of motor vehicle or any other goods or provision of services?
Answer: Government, institutions notified under United Nations (Privileges and

Immunities) Act 1947, and Embassies, Consulates, High Commission, Legation,
Commission and trade representation of a foreign State shall not be liable to levy of
TCS at the rate of 1 % under sub-section (1D) and (IF) of section 206C of the Act.
Question 4: Whether TCS is applicable on each sale of motor vehicle or on aggregate

value of sale during the year?
Answer: Tax is to be collected at source at the rate of 1 % on sale consideration of a

motor vehicle exceeding ten lakh rupees. It is applicable to each sale and not to
aggregate value of sale made during the year. This can be explained by way of an
illustration:
Illustration: Motor vehicle worth 20 lakh is sold and for which payments are
made in installments, one at the time of booking and the other at the time of
delivery. At the time of booking 5 lakh rupees are paid and 15 lakh rupees are
paid at the time of delivery. Tax at the rate of 1 % on 5 lakh rupees at the time of
booking and at the rate of 1 % on remaining 15 lakh rupees at the time of delivery
shall be collected at source.
Similar will be the position with regard to collection of tax at source under sub-section
(1D) of section 206C.
Question 5: whether TCS at the rate of 1 % on sale of motor vehicle is applicable in case
of an individual?
Answer: The definition of "Seller" as given in clause (c) of the Explanation below sub-
section (11) of section 206C shall be applicable in the case of sale of motor vehicles also.
Accordingly, an individual who is liable to audit as per the provisions of section 44AB
of the Act during the financial year immediately preceding the financial year in which the
motor vehicle is sold shall be liable for collection of tax at source on sale of motor
vehicle by him.
Cont…..41
: 41 :
Question 6: How would the provisions of TCS on sale of motor vehicle be applicable in
a case where part of the payment is made in cash and part is made by cheque?
Answer: The provisions of TCS on sale of motor vehicle exceeding ten lakh rupees is
not dependent on mode of payment. Any sale of Motor Vehicle exceeding ten lakh
would attract TCS at the rate of 1%.
Question 7: As per section 206C(1D) , tax is to be collected at source at the rate of 1 %

if sale consideration received in cash exceeds 2 lakh rupees whereas as per section
206C(lF) tax is to be collected at source at the rate of I % of the sale consideration of a
motor vehicle exceeding 10 lakh rupees. Whether TCS will be made under both sub-
section(lD) and (IF) of the section 206C @ 2% ,where part of the payment for purchase
of motor vehicle exceeds 2 lakh rupees in cash?
Answer: Sub-section (1F) of the section 206C of the Act provides for TCS at the rate of
1% on sale of motor vehicle of value exceeding 10 lakh rupees. This is irrespective of the
mode of payment. Thus if the value motor vehicle is 20 lakh rupees , out of which 51akh
rupees has been paid in cash and balance amount by way of cheque, the tax shall be
collected at source at the rate of 1% on total sale consideration of 20 lakh rupees only
under sub-section (IF) of section 206C of the Act. However, if a vehicle is sold for 8 lakh
rupees and the consideration is paid in cash, tax shall be collected at source at the rate of
1% on 8 lakh rupees as per sub-section (lD) of section 206C of the Act.
Compliance of section 139A regarding PAN and penalties for non-compliance
142. As per section 139(5C) every –

i. buyer or
ii. licensee or
iii. lessee
referred to in section 206C shall intimate his PAN to the person
responsible for collecting tax referred to in section 206C.
143. As per section 139(5D) every person collecting tax in accordance with the
provisions of section 206C shall quote the PAN of every –
o buyer or
o licensee or
o lessee
referred to in section 206C –
o in all certificates u/s 206C(5)
o in all returns u/s 206C(5A) or 206C(5B)
o in all statements u/s 206C(3) proviso.
Cont…..42
: 42 :
144. As per section 272B(1) if a person fails to intimate his PAN u/s 139A(5C) to –
o buyer or
o licensee or
o lessee
referred to in section 206C, as the case may be, he may be liable for penalty of
Rs. 10000/-.
145. As per section 272B(2) if a person intimates a PAN –

o which is false, and
o which he either knows or believes to be false or
o does not believe to be true,
he may be liable for penalty of Rs. 10000/-.
146. As per section 272B(1) if a person fails to quote the PAN intimated u/s
139A(5C) by -
o buyer or
o licensee or
o lessee
referred to in section 206C, or quote such PAN -
o which is false, and
o which he either knows or believes to be false or
o does not believe to be true,
he may be liable for penalty of Rs. 10000/-.
TCS rates and thresholds

Rates and thresholds for TCS w.e.f 1.6.2016
{u/s 206C as amended by the Finance Act, 2016}
SN Section Commodity / Utility Threshold Rate Point of TCS Amount of

of TCS
TCS
(1) (2) (3) (4) (5) (6) (7)
1 206C(1) Alcoholic liquor for - 1% Debiting of the A sum equal

human consumption amount payable or to the
receipt of such (%)
amount, whichever of such
is earlier amount
2 206C(1) Tendu leaves - 5% Debiting of the A sum equal
amount payable or to the
receipt of such (%)
is earlier amount
3 206C(1) Timber obtained under a - 2.5% Debiting of the A sum equal

forest lease amount payable or to the
receipt of such (%)
is earlier amount
4 206C(1) Timber obtained by any - 2.5% Debiting of the A sum equal

mode other than under a amount payable or to the
forest lease receipt of such (%)
is earlier amount
5 206C(1) Any other forest - 2.5% Debiting of the A sum equal

produce not being a amount payable or to the
timber or tendu leaves receipt of such (%)
is earlier amount
6 206C(1) Scrap - 1% Debiting of the A sum equal

{Clause (b) of amount payable or to the
Explanation to section receipt of such (%)
206C} amount, whichever of such
is earlier amount
7 206C(1) Minerals, being - 1% Debiting of the A sum equal

 coal or amount payable or to the
 lignite or receipt of such (%)
 iron ore amount, whichever of such
is earlier amount
8 206C(1C) Parking lot - 2% Debiting of the A sum equal

receipt of such (%)
is earlier amount
9 206C(1C) Toll Plaza - 2% Debiting of the A sum equal
receipt of such (%)
is earlier amount
10 206C(1C) Mining {excluding of - 2% Debiting of the A sum equal

mineral oils, petroleum amount payable or to the
and natural gas} receipt of such (%)
is earlier amount
11 206C(1C) Quarrying {excluding of - 2% Debiting of the A sum equal

mineral oils, petroleum amount payable or to the
and natural gas} receipt of such (%)
is earlier amount
12 206C(1D) Bullion Exceeding 2% Receipt of such A sum equal

Rs. 2 lakh amount to the
{any amount} (%)
in cash of sale
consideration
13 206C(1D) Jewellery Exceeding 2% Receipt of such A sum equal

{Clause (ab) of Rs. 5 lakh amount to the
Explanation to section {any amount} (%)
206C} in cash of sale
consideration
{Clause (ii) of
Explanation to section
2(14)}
14 206C(1D) Any goods Exceeding 1% Receipt of such A sum equal

{any amount} (%)
in cash of sale
consideration
15 206C(1D) Any service Exceeding 1% Receipt of such A sum equal

{any amount} (%)
in cash of sale
consideration
16 206C(1F) A motor vehicle Exceeding 1% Receipt of such A sum equal

{any amount} (%)
of the sale
consideration
Glimpse of provisions relating to TCS in Income Tax Act, 1961
Profit and gains from the business of trading in alcoholic liquor, forest produce, scrap, etc.
Sl. No. Section Subject
1 206C(1) TCS on goods of the nature mentioned in the ‘Table’ (7)
2 206C(1A) Declaration by buyer for ‘nil’ TCS

{Rule 37C – Form No. 27C}
3 206C(1B) Furnishing of declaration in Form No. 27C to Commissioner etc.
4 206C(1C) TCS on transactions of the nature mentioned in the ‘Table’ (3)
5 206C(1D) TCS on transaction of sale and purchase of bullion, jewellery, goods

and services for considerations exceeding the specified thresholds
involving receipt of any amount in cash as consideration.
6 206C(1E) Exemption from TCS u/s 206C(1D) as may be prescribed.
7 206C(1F) TCS on transaction of sale and purchase of motor vehicle of the value
exceeding Rs. 10 lakh.
8 206C(2) TCS shall be without prejudice to other mode of recoveries.
9 206C(3) Payment of TCS with in prescribed time

{Rule 37CA(1) & (2)}
206C(3) proviso Furnishing of quarterly TCS statement

{Rule 31AA in Form No. 27EQ and 27B}
10 206C(3A) Furnishing of TCS statement by office of the Government.
11 206C(3B) Furnishing of correction statement of TCS.
12 206C(4) Credit of TCS in accordance with rule 37-I .
13 206C(5) Issue of TCS Certificate

{Rule 37D – Form No. 27D}
ITD to prepare and issue Form No. 26AS under rule 31AB
14 206C(5A) TCS before 1.4.2005.
15 206C(5B) Furnishing of TCS return in computer media

{Rule 37EA - accompanied with Form No. 27A}
16 206C(5C) Evidentiary value of TCS return in computer media.
17 206(5D) Defective TCS statement and its correction.
18 206C(6) Liability in case of failure to collect tax.
19 206C(6A) Deemed to be an assesse in default in case of failure to deduct or pay after

deduction.
Proviso – person other than person referred in sub-section (1D) shall not be
deemed to be in default on furnishing of prescribed certificate.
{See rule 37J and Form No. 27BA}
20 206C(7) Liability of simple interest @ 1% per month or part of the month in case
tax is not collected or after collected not paid.
21 206C(8) Tax collected if not paid shall be a charge on the assets of person
responsible.
22 206C(9) Application by buyer etc. for obtaining Certificate from AO for TCS u/s
206C(1),(1C),(1D) at lower rate and Certificate by AO.
{Rule 37G – Form No. 13} & {Rule 37H}
23 206C(10) Certificate from AO for TCS at lower rate shall be valid till cancelled.
24 206C(11) CBDT empowered to make ruled for sub-section (9).
25 Explanation (a) Definition of “accountant”
26 Explanation (aa) Definition of “buyer”
27 Explanation (ab) Definition of “jewellery”
28 Explanation (b) Definition of “scrap”
29 Explanation (c) Definition of “seller”
30 139A(5C) Every buyer or licensee or lessee referred to in section 206C is obliged to

intimate his PAN to person responsible to collect tax u/s
206C.
31 139A(5D) Every person collecting tax at source u/s 206C shall quote the PAN of
every buyer or licensee or lessee referred to in that section in –
(i) TCS certificates issued u/s 206C(5)
(ii) Returns furnished u/s 206C(5A) or (5B)
(iii) Statements furnished u/s 206C(3)
32 206CA Tax-collection account number

{Rule 114AA – Form 49B}
33 206CB Processing of statements of tax collected at source
34 154(2)(b) Application for rectification of intimation issued u/s 206CB
35 154(1)(d) Rectification of intimation issued u/s 206CB
36 246A(1)(a) Appeal against intimation issued u/s 206CB
37 156 Intimation issued u/s 206CB is a notice of demand.
38 272A(2)(g) Penalty for failure to furnish a certificate of TCS u/s 206C.
39 272A(2)(j) Penalty for failure to deliver in due time a copy of declaration received u/s
206C(1A).
40 272A(2)(k) Penalty for failure to deliver in due time a copy of statement under proviso
to section 206C(3).
41 272A(2)(m) Penalty for failure to deliver in due time a statement under section
206C(3A).
42 271CA Penalty for failure to collect tax at source.
43 272B Penalty under sub-section (1) for failure to intimate PAN to seller or
penalty under sub-section (2) for intimating PAN which is false.
44 234E(1)/(3)/(4) Late Fee for failure to deliver a statement under proviso to section
206C(3).
45 276BB Prosecution for failure to pay the tax collected at source.
Rules relating to TCS provisions
Sl. No. Section Subject Rule Form
1 206CA Application for allotment of TAN 114AA 49B
2 206C(1A) Declaration to be furnished by the buyer for ‘nil’ TCS 37C 27C
3 206C(1B) Furnishing of declaration to Commissioner etc. 37C 27C
4 206C(3) Payment of TCS with in prescribed time 37CA
206C(3) Furnishing of quarterly TCS statement 31AA 27EQ

Proviso 27A
5 206C(4) Credit of TCS 37-I -
6 206C(5) Issue of TCS Certificate 37D 27D

ITD to prepare and issue details of TCS 31AB 26AS
7 206C(5A) Furnishing of TCS return where TCS is made 37E 27E

before 1.4.2005 37F 27A
8 206C(5B) Option to furnishing of TCS return in computer 37EA 27B

media
9 206C(6A) Deemed to be an assesse in default in case of failure to 37J 27BA

deduct or pay after deduction.
Proviso – person other than person referred in sub-
section (1D) shall not be deemed to be in default on
furnishing of prescribed certificate.
10 206C(9) Application by buyer etc. for obtaining Certificate 37G 13
from AO for TCS at lower rate.
11 206C(9) Certificate by AO for TCS at lower rate. 37H -
Codes to be used in TCS quarterly statement in Form 27EQ
Section code as per Collection code to be

Nature of Collection
IT Act chosen in RPU
Alcoholic liquor for human consumption 6CA A
Timber obtained under a forest lease 6CB B
Timber obtained by any mode other than a forest lease 6CC C
Any other forest product not being timber or tendu
6CD D
leave
Scrap 6CE E
Parking Lot 6CF F
Toll Plaza 6CG G
Mining and Quarrying 6CH H
Tendu Leaves 6CI I
Sale of certain Minerals(Applicable from 2nd Quarter
6CJ J
of FY 2012-13 onwards)
Bullion and Jewellary (Applicable from 2nd Quarter of
6CK K
FY 2012-13 onwards)
Due dates for payment of TCS, quarterly statement and PCS certificate
Due dates for payment of TCS

{Section 206C(3) of the Act r/w rule 37CA (1) & (2) of the Rules}
SN Deductor Time of payment of TDS

(1) (2)
1 Collection made by an office of on the same day where the tax is paid without production of an
the Government of all sums income-tax challan.
collected under :
 sub-section (1)
 sub-section (1C)
2 Collection made by an office of on or before 7 days from the end of the month in which the
the Government of all sums collection is made, where tax is paid accompanied by an
collected under : income-tax challan.
 sub-section (1)
3 Collection made by collector in any other case, within one week from the last day of the
other than an office of the month in which the collection is made.
Government of all sums
collected under:
 sub-section (1)
Due dates for furnishing of quarterly TCS statements

{u/s 206C(3) proviso of the Act r/w rule 31AA of the Rules}
SN Quarter of the Due date

financial year
ended
(1) (2) (3)
1 30th June 15th July of the financial year
2 30th September 15th October of the financial year
3 31st December 15th January of the financial year
4 31st March 15th May of the financial year immediately following the financial year in which
the collection is made
Due dates for issue of TCS certificate in Form 27D

{u/s 206C(5) of the Act r/w rule 37D(3) of the Rules}
SN Quarter of the Due date Due dates for issue of TCS

financial year Certificates u/s 206C(5)
ended r/w rule 37D(3)
(1) (2) (3) (4)
1 30th June 15th July of the financial year 30th July of the FY
2 30th September 15th October of the financial year 30th October of the FY
3 31st December 15th January of the financial year 30th January of the FY
4 31st March 15th May of the financial year 30th May of the FY immediately
immediately following the financial year following the FY in which collection
in which the collection is made is made
*****************
Disclaimer
This document has been prepared for academic use only for sharing knowledge on the subject
with fellow professionals. Though every effort has been made to avoid errors or omissions in this
document yet any error or omission may creep in. Therefore, it is notified that I shall not be
responsible for any damage or loss of action to any one, of any kind, in any manner there from.
On the contrary it is suggested that to avoid any doubt the user should cross check the
correctness of text, contents and the law with the original documents.
Conceived, designed and prepared by

CA. Rajiv Kumar Jain
Member of ICAI
5269, Ajit Mansion,
Shradhanand Marg,
Delhi-110006
Phone : 23214596 Mobile. : 9810288997
E’mail ID : rajivkjain0608@gmail.com
Dated : 20.6.2016 E’mail ID : rajivkjain0608@rediffmail.com

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Revised update on

Evolution and history of TCS

 Thereafter section 206CA and 206CB were inserted.

o Simultaneously, Section 203A of the Act was amended by substitution vide

 Section 206CB {Processing of statement of tax collected at source} was inserted by

“as an anti-evasion measure, I propose to provide for assessment of income of

“Instructions regarding deduction of tax at source on profits and gains from

i. Considerable difficulty has been felt in the past in assessing income of

4. Legislative intent and thrust of the Government

o to charge tax in respect of income of such business on presumption and

o to widen the tax base.

5. Business vs. Profession

Relevance of Finance Minister’s Speech in interpreting tax laws

 the mischief sought to be remedied by the legislation and

Relevance of the Statement of Objects and Reasons

Per Kapur, J. : In construing an enactment and determining its true scope it is

From the speech of

155. I propose a series of measures to deter generation and use of unaccounted

To this end, I propose –

Memorandum explaining the proposed amendment vide Finance Act, 2012

 for curbing the flow of unaccounted money in the trading system of

CBDT Circular No. 3/2012, dated 12.6.2012

From the speech of

 Through these measures the Government intends to advance the collection

Memorandum explaining the proposed amendment vide Finance Bill, 2016

This amendment will take effect from 1st June, 2016.

Section 206C(1D) as amended by Finance Act, 2016

23. Therefore, to discourage use of cash in transactions of –

Chapter XVII-BB - Collection at source

TCS in relation to goods specified in the ‘Table’ in sub-section (1)

Declaration for ‘nil’ TCS

(1A) Notwithstanding anything contained in sub-section (1), no collection of tax shall be

TCS in relation to parking lot, toll plaza, mine and quarry

TCS on Motor Vehicles of value exceeding Rs. 10,00,000/-

Payment of TCS and furnishing of quarterly statement of TCS

TCS quarterly statement where the collector is an office of the Government

TCS correction statement

Issue of TCS certificate and statement in Form No. 26AS

TCS return where tax collected before 1.4.2005

Person responsible shall remain liable towards the Central Government

Defaulting Collector shall be deemed to be in default

Simple interest on TCS

Certificate by AO for TCS at lower rate

Explanation.— For the purposes of this section,—

(aa) "buyer" with respect to —

(A) a public sector company, the Central Government, a State Government,

Comments with regards to Section 206C(1D) & (1F)

39. As per clause (c) of the Explanation "seller" means -

42. However, in the case of –

b. in the case of provision of service in the nature of business e.g. ‘business of

c. in the case of provision of service in the nature of “profession”, section

(aa) "buyer" with respect to —

(A) a public sector company, the Central Government, a State

51. As per above definition “buyer” is a person who -

TCS u/s 206C(ID)

63. Tax is to be collected u/s 206C(1D) in relation to transaction of –

65. The incidence which reasons TCS is the –

70. Such price is in fact the consideration for sale.