TAX COLLECTED AT SOURCE

[Mr. M. GOVINDARAJAN]

Section 206C of the Income Tax Act, 1961 (‘Act’ for short) deals with the tax collected at source.  Section 206CA of the Act deals with the obtaining of tax collection account number.   The following are the rules dealing with the tax collected at source:

• Rule 31AA – Statement of collection of tax under proviso to Section 206C (3);
• Rule 37C – Declaration by a buyer for no collection of tax at source under Section 206C(1A);
• Rule 37CA – Time and mode of payment to Government account of tax collected at source under Section 206C;
• Rule 37D – Certificate of tax collected at source under Section 206C(5);
• Rule 37E – Prescribed returns regarding tax collected at source under Section206C (5A);
• Rule 37EA – Returns regarding tax collected at source on computer media under Section 206C (5B);
• Rule 37F – Prescribed authority for purposes of Section 206C(5A);
• Rule 37G – Application for certificate for collection of tax at lower rates under Section 206C(9);
• Rule 37H – Certificate for collection of tax at lower rates from buyer under Section 206C(9);
• Rule 37-I – Credit for tax collected at source for the purpose of Section 206C(4);
• Rule 114AA – Application for allotment of a tax collection account number.

TAX COLLECTION AT SOURCE:

Section 206C prescribes three types of categories for tax collection at source.  According to section 206C(1)  every person, being a seller shall, at the time of receipt of amount from the buyer in cash or by cheque or draft or by any other mode, collect from the buyer of any goods of the nature specified in the table below, a sum of equal to the percentage specified in the table of such amount as income tax.

Sl. No.	Nature of Goods	Percentage
1	Alcoholic Liquor for human consumption	1%
2	Tendu leaves	5%
3	Timber obtained under a forest lease	2.5%
4	Timber obtained by any mode other than under a forest lease	2.5%
5	Any other forest produce not being timber or tendu leaves	2.5%
6	Scrap	1%
7	Minerals, being coal or lignite or iron ore	1%

No collection of tax is to be made from the buyer, who is resident in India and furnishes a declaration in writing in duplicate in the prescribed form and verified in the prescribed manner to the effect that the goods mentioned in the above said table are to be utilized for the purposes of manufacturing, processing or producing articles or things or for the purpose of generation of power and not for trading purposes.  The person collecting tax shall delivery one copy of the said declaration to the Chief Commissioner on or before 7^th day of the next month following the month in which the declaration is furnished to him.

According to Section 206C(1C) every person who grants a lease or a licence or enters into a contract or otherwise transfers any right or interest either in whole or in part in any parking lot or toll plaza or mine or quarry to another person, other than a public sector company for use of business shall collect the income tax as detailed in the table below:

Sl. No	Nature of contract or licence or lease etc.,	Percentage
1	Parking lot	2%
2	Toll Plaza	2%
3	Mining and quarrying	2%

According to Section 206C(1D) every person, being a seller, who receives any amount in cash as consideration for sale of bullion (excluding any coin or any other article weighing 10 grams or less) or jewellery shall collect a sum equal to 1% of sale consideration as income tax, if such consideration-

• For bullion exceeds Rs.2,00,000; or
• For jeweler, exceeds Rs.5,00,000.

DEFINITION:

For this purpose the term ‘seller’ means the Central Government, a State Government or any local authority or corporation or authority established by or under a Central, State or Provincial Act, or any company or firm or co-operative society and also includes an individuals or a Hindu undivided family whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under Section 44AB(a) or 44AB(b) during the financial year immediately preceding the financial year in which the goods of the nature specified in the above table  or under sub section (1D) are sold.

‘Scrap’ means waste and scrap from the manufacture or mechanical working of materials which is definitely not usable as such because of breakage, cutting up, wear and other reasons.

‘Buyer’ with respect to goods means a person who obtains in any sale, by way of auction, tender or any other mode, goods of the nature specified in the table or the right to recover any such goods but does not include-

• A public sector companies, the Central Government, a State Government, and an embassy, a High Commission, legation, commission, consulate and the trade representation, of a foreign state and a club; or
• A buyer in the retail sale of such goods purchased by him for personal computation.

TAX COLLECTION ACCOUNT NUMBER:

An application for the allotment of a tax collection account number shall be made in duplicate in Form 49B to the Assessing Officer having jurisdiction to assess the application. Where a tax collection account number has been allotted to a person, such person shall quote such number-

• In all challans for the payment of any sum;
• In all certificates furnished;
• In all the returns to any income tax authority; and
• In all other documents pertaining to such transactions as may be prescribed in the interest of revenue.

PAYMENT OF TAX:

The tax collected shall be deposited within 7days from the last day of the month in which collection is made to the credit of Central Government. Delay in payment will attract interest @ 1% per month or part thereof. After 31.03.2008 all corporate assesees and other assessees who are subject to compulsory audit under Section 44AB have to make electronic payment of tax through internet banking. 

ISSUE OF CERTIFICATE:

The person collecting tax shall issue a quarterly certificate of tax collected with full details in Form 27D. The due date of issuing such certificate is as below:

Period	TCS certificate to be issued on or before
Quarter ending 30th June of the financial year	July 30 of the financial year
Quarter ending 30th September of the financial year	October 30 of the financial year
Quarter ending 31st December of the financial year	January 30 of the financial year
Quarter ending 31st March of the financial year	May 30 of the financial year immediately following the financial year in which tax is collected

If the said certificate is lost, a duplicate certificate may be issued on a plain paper giving necessary details as contained in Form No. 27D. However, the Assessing Officer shall get the payment certified from the Assessing officer designated in this behalf by the Chief Commissioner or Commissioner and shall also obtain an indemnity bond from the assessee. taxmanagementindia.com

RETURNS:

Quarterly return is to be submitted for the tax collected and deposited and the due date of filing the returns is as detailed below:

Period	Due date
First Quarter ending on 30th June	15th July
Second Quarter ending on 30th September	15th October
Third Quarter ending on 31st December	15th January
Fourth Quarter ending on 31st March	15th May

The quarterly return cannot be submitted before payment of tax, interest if any and late fee, if any.  If PAN data of collectee is lower than 85%, quarterly return will not be accepted.

CONSEQUENCES:

If a seller does not collect or after collecting the tax fails to pay the tax, he shall be deemed to be an assessee in default in respect of the tax and the amount of the tax together with the amount of simple interest, calculated @ 1%, or part thereof, shall be charged.  Sec. 276BB of the Act provides for prosecution who fails to pay tax collected at source for a period which shall not be less than 3 months which may extend up to 7 years with fine.