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The TCS on the transaction of goods would double if you haven’t filed your ITRs for the previous year. Read more about section 206CCA now.
Indian tax authorities are constantly working towards regulating the tax payment behaviour of such a large population of our nation. It is done in various ways, such as by imposing fines, spreading awareness, giving incentives, charging higher rates, etc.
The tax payment for any transaction is ascertained as per the different rates and thresholds. However, income tax return (ITR) filing is crucial for disclosing the financial information of any citizen, whether it is taxable or not. It helps the inclusion of larger data.
A similar action is taken for the person who has not filed a return for the previous year. Read everything about section 206CCA of the Income Tax Act, 1961, in this article.
About Section 206CCA
Section 206 CCA instructs the seller of goods to collect higher TCS than the prescribed rates if the person has failed to file his/her ITR for the last financial year. This higher tax is collected from the buyer in the transaction.
The seller collects the tax on the transaction, which is then paid to the government. The collection of tax by the seller is known as tax collected at source (TCS). All the transactions of goods that are eligible for TCS are prescribed with certain limits and rates.
Section 206AB and section 206CCA are usually confused, as they both instruct on a collection of higher tax in light of failure in filing ITR for last year. However, the main distinction between them is that section 206AB charges higher tax deducted at source (TDS), while section 206CCA charges higher TCS.
Also, read: What is ITR? How to file ITR Declaration?
Applicability of the section.
The applicability of section 206CCA is prescribed by the Central Board of Direct Tax as follows:
- The person who has failed to file the income tax return for the previous financial year should be charged with a higher TCS. For example:
Year of transaction: FY 2023-2024
Previous Year: FY 2022-2023
The person failed to file the ITR for FY 2022-2023.
- The aggregate TDS and TCS for that previous year should be more than ₹50,000/-.
- The period for furnishing the previous year’s ITR has expired.
(These conditions were applicable from April 1, 2022.)
Previously, as per the Finance Act of 2021, these ITR conditions were different.
- The person who has failed to file the income tax return for the previous financial year and the year preceding it (means for the two previous years) should be charged with higher TCS. For example:
Year of transaction: FY 2023-2024
Previous Years: FY 2022-2023 & FY 2021-2022
The person failed to file the ITR for both or any of these previous years.
- The aggregate TDS and TCS for that previous year and the year preceding it means for the two previous years should be more than ₹50,000/-.
- The period for furnishing the previous year’s ITR has expired.
The tax does not apply to the non-resident person without any permanent settlement of the business in India. The facility for compliance check for section 206AB and section 206CCA is provided by the IT department in the following document: CBDT circular.
Must read: What is Form 26AS?
Rates and calculation.
The higher rates of TCS that should be charged under section 206CCA of the Income Tax Act, 1961, are as follows:
A higher amount between –
- Double the TCS rate for that product
- 5% rate
Let’s simplify it with an example:
Example 1
Ms Manisha sells tendu leaves of ₹2,00,000/- to Mr Keshav. As per section 206CI, the rate for tendu leave is 5%. So, as per the provisions:
- Double rate = 10%
- Else, charge 5%
So, the higher of the two means 10% TCS would be charged on this transaction. TCS = ₹20,000/-
Example 2
Mr Rajesh sells iron ore of ₹10,00,000/- to Ms Mona. As per section 206CJI, iron ore is categorised as minerals, and the rate is 1%. So, as per the provisions:
- Double rate = 2%
- Else, charge 5%
So, the higher of the two means 5% TCS would be charged on this transaction. TCS = ₹50,000/-
Do not miss! Refund 101: A guide to growing your income tax returns refund.
Conclusion
The regulation of charging higher TCS is a crucial disciplinary action against the people failing to file ITR. The section instructs charging higher TCS, either at the double rate of TCS charged or at 5% (whichever is higher). Moreover, its applicability and compliance list should be checked.
FAQ
This section deals with every detail, such as rates, applicability, definitions, time, etc, of the tax collected at source (TCS). This tax is to be collected from the buyer of the commodity and submitted to the government by the seller. Its return should be filed by the seller every quarter. Moreover, the buyer paying this tax can claim it in the annual return. Different sections are prescribed in this, which includes various commodities and their rates.
The permanent account number (PAN) card stores all details regarding the income tax, its return filing, etc. Under section 206CCA, the rates of TCS on any transaction differ when the PAN card is not furnished by the buyer. Accordingly, the higher of the following rates is applicable:
The rate mentioned in section 206C as per the transaction
The 5% rate.
Yes, A person can easily get a refund for a TCS payment if his/her liability of the charge is less than the actual payment made. It should be informed well in time to the authorities, and a receipt of excess TCS payment made by the buyer should be available. The receipt is further verified while processing the refund. Moreover, this receipt can be set off at the time of filing ITR.
The tax deducted at source (TDS) should be deducted by the buyer at a prescribed tax rate while making the payment. However, the tax collected at source (TCS) should be collected by the seller at a prescribed tax rate while receiving the payment. The rates, limits, and commodities included under TDS and TCS are different.
Section 206C deals with TCS on items such as the sale of goods by the e-commerce operator, the sale of normal goods, and the sale of overseas tour packages. The person collecting this TCS should compulsorily have a TAN. If a person fails to file the quarterly TCS return, then he/she is charged with 200/- for each day of this delay from the due date of return filing.