UPDATED | India implements Tax Collection at Source from 1 October 2020

A sunrise view of Taj mahal, Agra, India

On 1 October 2020, the Tax Collection at Source (TCS) requirements will come into effect in India.

According to Section 206C (sub-section 1H) of the Income Tax Act, certain suppliers are liable to collect TCS at 0.075%** on the amount exceeding Rs 50L billed to a buyer for the sale of goods during the financial year. In other words: if the amount received from a buyer during the financial year exceeds Rs 50L, then the amounts in excess of Rs 50L will be the value for the collection of tax.

Note that the amount of GST should be included in the value for the calculation of the TCS amount. While it is strictly speaking not a requirement, as good practice, the applicable TCS amount should be visible on the invoice, so the total amount due is clear to your customer.

Which suppliers are subject to this requirement?

If your company’s turnover (or total sales) was Rs 10Cr or higher in the previous financial year the requirement to collect TCS will apply.

To which goods does the requirement apply?

The requirement applies to ANY GOODS sold, except:

  • If goods are exported from India to any country outside India.
  • If the buyer is liable to deduct TDS (Tax Deducted at Source) under the Income Tax Act.
  • If the goods sold are already covered under subsections (1), (1C), (1F) and (1G) of section 206C of the Income Tax Act

Do you want to know more about raising invoices with TCS? Contact our dedicated Compliance team to learn more today!

*NOTE: that the current rate of 0.075% applies from 01.10.2020 until 31.03.2021. After this period, the Government may decide to return to the original TCS rate of 0.1%


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