The provisions of tax collection at source (TCS) have been on the statute books for many years now. Under these provisions, certain persons are required to collect tax at specified percentages, ranging from 1% to 5%, from the opposite parties in respect of certain specified transactions. Most of these are business transactions, not affecting the common man. The person from whom the TCS is collected gets credit for the TCS in his income tax return.
In recent years, the scope of TCS is being extended in an effort to curb tax evasion and black money transactions. In 2012, certain transactions affecting customers—receipts in cash, for sale of bullion exceeding Rs.2 lakh, and of jewellery exceeding Rs.5 lakh—was brought within its ambit. In this Budget, from 1 June 2016, the scope of TCS has been significantly expanded to cover a wide variety of transactions, which could affect a large number of customers. These transactions are sale of a motor vehicle of value exceeding Rs.10 lakh, and receipt of money for sale of goods or provision of services exceeding Rs.2 lakh. In such cases, besides the sale price, the seller is required to collect an additional 1% from the purchaser, and pay it to the government.
This provision relating to vehicles applies not only to businesses that sell goods or provide services, but to all types of sellers. Even a salaried employee who sells a car for more than Rs.10 lakh, would need to collect TCS. Even a vehicle manufacturer selling vehicles to dealers, and a dealer selling those vehicles to customers, would need to collect TCS.
