Section 206C(1H) was introduced in the Income Tax Act, 1961, by the Finance Act 2020, and it has significant implications for businesses that engage in the sale of goods or services. This section mandates the collection of TCS (Tax Collected at Source) on the sale of certain goods and services at a specified rate, thereby expanding the scope of TCS provisions under the Act. In this blog post, we will delve into the details of Section 206C(1H) and explore its implications for businesses.
What is Section 206C(1H)?
Section 206C(1H) of the Income Tax Act, 1961, pertains to the collection of TCS on the sale of certain goods and services. It applies to businesses with a turnover of more than Rs. 10 crores in the previous financial year. The section specifies that if a seller receives consideration for the sale of goods or services, exceeding Rs. 50 lakhs in a financial year, then the seller is required to collect TCS from the buyer at the specified rate.
Goods and Services Covered under Section 206C(1H)
Section 206C(1H) applies to the sale of certain goods and services. The goods covered include alcoholic liquor for human consumption, tendu leaves, timber obtained under a forest lease, timber obtained by any mode other than under a forest lease, any other forest produce not being timber or tendu leaves, scrap, minerals, and bullion. The services covered include the sale of overseas tour packages, remittance of forex under the Liberalised Remittance Scheme of the Reserve Bank of India, and the sale of goods, excluding exports, made to a person outside India.
Rate of TCS under Section 206C(1H)
The rate of TCS under Section 206C(1H) is specified in the Finance Act of each financial year. For FY 2021-22, the rate of TCS is 0.1% of the sale consideration received by the seller. However, if the buyer does not furnish his PAN or Aadhaar, the TCS rate would be 1%.
Exemptions under Section 206C(1H)
Certain transactions are exempt from TCS under Section 206C(1H). These include transactions in which the buyer is the Central Government, a State Government, an embassy, a High Commission, a legation, a commission, a consulate, or the trade representation of a foreign state. Additionally, transactions in which the buyer is a local authority, a statutory corporation, a company, a partnership firm, or a limited liability partnership that has been in existence for less than three years from the date of its incorporation are also exempt from TCS.
Conclusion
Section 206C(1H) of the Income Tax Act, 1961, is a significant development in the TCS provisions of the Act. It has expanded the scope of TCS to cover the sale of certain goods and services and has increased the compliance burden on businesses. As a result, businesses need to be aware of the provisions of this section and ensure compliance to avoid penalties and legal issues.
Other Related Blogs: Section 144B Income Tax Act
Frequently Asked Questions (FAQs)
Q:1 What is Section 206C(1H) of the Income Tax Act, 1961?
A: Section 206C(1H) pertains to the collection of TCS (Tax Collected at Source) on the sale of certain goods and services. It applies to businesses with a turnover of more than Rs. 10 crores in the previous financial year.
Q:2 Which goods and services are covered under Section 206C(1H)?
A: Section 206C(1H) applies to the sale of certain goods and services, including alcoholic liquor for human consumption, tendu leaves, timber obtained under a forest lease, timber obtained by any mode other than under a forest lease, any other forest produce not being timber or tendu leaves, scrap, minerals, and bullion. The services covered include the sale of overseas tour packages, remittance of forex under the Liberalised Remittance Scheme of the Reserve Bank of India, and the sale of goods, excluding exports, made to a person outside India.
Q:3 Who is required to collect TCS under Section 206C(1H)?
A: If a seller receives consideration for the sale of goods or services, exceeding Rs. 50 lakhs in a financial year, then the seller is required to collect TCS from the buyer at the specified rate.
Q:4 What is the rate of TCS under Section 206C(1H)?
A: The rate of TCS under Section 206C(1H) is specified in the Finance Act of each financial year. For FY 2021-22, the rate of TCS is 0.1% of the sale consideration received by the seller. However, if the buyer does not furnish his PAN or Aadhaar, the TCS rate would be 1%.
Q:5 Are there any exemptions under Section 206C(1H)?
A: Certain transactions are exempt from TCS under Section 206C(1H). These include transactions in which the buyer is the Central Government, a State Government, an embassy, a High Commission, a legation, a commission, a consulate, or the trade representation of a foreign state. Additionally, transactions in which the buyer is a local authority, a statutory corporation, a company, a partnership firm, or a limited liability partnership that has been in existence for less than three years from the date of its incorporation are also exempt from TCS.
Q:6 When does the TCS collected under Section 206C(1H) need to be deposited?
A: The TCS collected under Section 206C(1H) needs to be deposited by the 7th of the following month in which the TCS is collected. For example, if TCS is collected in the month of April, it needs to be deposited by the 7th of May.
Q:7 What are the consequences of non-compliance with Section 206C(1H)?
A: Non-compliance with Section 206C(1H) can attract penalties and legal issues. A penalty equal to the amount of TCS not collected or collected but not deposited can be levied. Additionally, interest can also be charged on the amount of TCS not deposited.
