Tax collection at source section 206C of income tax act

Every person, being a seller collect from the buyer of goods specified in section 206C tax at source. Tax will also be collected by a person who grants lease or a licence in respect of parking lot or toll plaza or mine or quarry, to another person.

APPLICABILITY OF SECTION 206C

(1) Every person, being a seller, shall collect tax from the buyer of any goods specified in section 206C, at the time of -

• Debiting the amount paid or payable by the buyer to the account of the buyer; or

• Receipt of such amount from the buyer,

- whichever is earlier.

(2) Tax will be collected by every person, who grants a lease or a licence or enters into a contract or enters into a agreement otherwise transfers any right or interest in -

• any parking lot; or

• toll plaza; or

• mining and quarrying other than mining or quarrying of mineral oil (mineral oil includes Petroleum and Natural gas), to another person (other than a public sector company / PSU) for the use of such parking lot or toll plaza or mining or quarrying for the purpose of business shall collect tax from the licensee or lessee or enters into a contract at the time of:

• Debiting the amount paid or payable by the licensee or lessee to the account of the licensee or lessee; or

• Receipt of such amount from the licensee or lessee or enters into a contract.

- whichever is earlier.

MEANING OF IMPORTANT TERMS

(1) For this purpose “Seller” means --

(a) The Central Government; or

(b) State Government; or

(d) Statutory corporation; or

(e) Authority or domination established by or under a Central, State or Provincial Act; or

(f) Company; or

(g) Firm; or

(h) Co-operative society; or

(i) An individual or Hindu Undivided Family (HUF), whose books of account are required to be audited under section 44AB (income tax audit) during the fiscal year immediately preceding the fiscal year in which such goods are sold.

(2) For this purpose “Buyer” (for specified goods other than motor car) means a person who obtains in any sale (by way of auction, tender or any other mode) goods of the nature or specified goods or the right to receive any such goods but does not include the following—

(i) A public sector company / PSU, the Central Government / CG, a State Government / SG and an embassy, a High Commission / HC, Legation, Commission, consulate and the trade representation, of a foreign state / state outside India and a club; or

(ii) A buyer in the retail sale of such goods (for specified goods other than motor car) purchased by him for personal consumption.

• Buyer in case of motor car for this purpose defined as a person who obtains in any sale, motor care, but does not include--

(a) the Central Government / CG, a State Government / SG and an embassy, a High Commission / HC, legation, commission, consulate and the trade representation of a foreign State; or

(b) a local authority; or

(3) For this purpose “Specified goods” includes--

(i) Alcoholic Liquor for human consumption

(ii) Tendu leaves;

(iii) Timber;

(iv) Any forest-produce;

(v) Scrap.

(vi) Specified minerals i.e., coal, lignite and iron-ore

(vii) Motor vehicle or motor car value of which exceeds ₹ 10 lakhs

RATE OF TCS

Rate as a percentage of the amount payable by the buyer or licensee or lessee. However, where the purchaser or licensee or lessee is a non-resident firm, non-corporate taxpayer or a non-domestic company (foreign company), then applicable surcharge (if any applicable), health and education cess is also applicable to be deducted along with aforesaid rates---

(1) Alcoholic liquor for human consumption @ 1%

(2) Tendu leaves @ 5%

(3) Timber obtained under a forest (jungle) lease @ 2.5%

(4) Timber obtained by any mode other than under a forest (jungle) lease @ 2.5%

(5) Any other forest (jungle) produce (not being timber or tendu leaves) @ 2.5%

(6) Scrap @ 1%

(7) Specified minerals @ 1%

(8) Motor car value of which exceeds ₹ 10 lakh @ 1%

(9) Parking lot, toll plaza, mining and quarrying (not including mining and quarrying of mineral oil, petroleum and natural gas) @ 2%

NOTE

For this purpose "Scrap" has been defined as waste and scrap from the manufacture or production or mechanical working of materials which is definitely not usable as such because of breakage, cutting up, wear and other reasons.

REQUIREMENT TO FURNISH PAN BY COLLECTEE SECTION 206CC

• Any person paying any sum, on which tax is collectible at source (TCS) shall furnish his permanent account number (PAN) to the person responsible for collecting such tax, failing which tax shall be collected at the higher of the consequent rates---

(i) at twice of the specified Tax Collection at Source (TCS) rate; or

(ii) at the rate of @ 5%.

• Where the permanent account number (PAN) provided is invalid or ineffective or does not belong to the collectee, it shall be deemed that the collectee has not furnished his permanent account number (PAN) to the collector.

EXCEPTIONS

The provisions (section 206CC) of higher rate shall not be applicable to a non-resident who does not have permanent establishment in India or resident of India.