What is Tax Collected at Source (TCS)?#
Tax Collected at Source (TCS) is a tax collected by the seller from the buyer at the time of sale of certain specified goods or services. Unlike TDS (which is deducted by the payer), TCS is collected by the seller and deposited with the government on the buyer's behalf.
TCS vs TDS — Key Difference#
| Aspect | TDS | TCS |
|---|---|---|
| Who deducts/collects | Payer (buyer) | Payee (seller) |
| On what | Payments made | Sales made |
| Common examples | Salary, FD interest, rent | Liquor, scrap, motor vehicles |
| Obligation | Payer must deduct | Seller must collect |
What Goods/Services Attract TCS?#
Under Section 206C, TCS applies to:
| Goods/Transaction | TCS Rate |
|---|---|
| Sale of alcohol for human consumption | 1% |
| Sale of tendu leaves | 5% |
| Sale of timber from forest | 2.5% |
| Sale of any other forest produce | 2.5% |
| Sale of scrap | 1% |
| Sale of minerals (coal, lignite, iron ore) | 1% |
| Sale of motor vehicle (> ₹10 lakh) | 1% |
| Overseas tour packages | 5% (or 20% without PAN) |
| Foreign remittance under LRS > ₹7 lakh | 20% (or 5% for education/medical loan) |
| Sale of goods > ₹50 lakh (non-specified) | 0.1% |
LRS TCS — Important for Travellers and Investors#
The most common TCS affecting salaried individuals relates to the Liberalised Remittance Scheme (LRS):
- Sending money abroad > ₹7 lakh/year → TCS at 20%
- Foreign travel packages → TCS at 5%
- Education/medical abroad (loan funded) → TCS at 0.5%
This TCS can be claimed as credit when filing ITR — it reduces your final tax liability.
How to Claim TCS Credit in ITR#
- TCS collected appears in your Form 26AS (Part B)
- When filing ITR, enter TCS amounts in the tax payment schedule
- TCS credit reduces your net tax payable
- If TCS > Tax payable, you get a refund
Common Scenario — Buying a Car#
If you buy a car worth ₹15 lakh:
- The dealer collects 1% TCS = ₹15,000
- Dealer deposits it with government against your PAN
- It appears in your Form 26AS
- You claim this ₹15,000 as credit when filing ITR