TCS collected at 0.75% on sale for which invoice raised before 01.04.2021 | Do you need to collect remaining 0.25% TCS if payment received after 01.04.2021

TCS on sale of goods was introduced under section 206C(1H) in Budget 2020, wherein a person had to collect 0.1% of sale of goods if the criteria mentioned in the section is met.

Due to the pandemic and lockdown, government decided to provide a relaxation, on various TDS and TCS provision, of 25% on the applicable TDS/ TCS rates.

This, relaxation was applicable on TDS deducted or TCS collected between 14.05.2020 to 31.03.2021.

Now, when this section of 206C(1H) was introduced people were confused as to whether collect TCS at the time of raising invoice or at the time of collecting money.

Hence, people started collecting TCS while raising invoice as it was convenient to include TCS in the invoice value rather than raising a separate debit note at the time of receipt.

However, later CBDT had issued a FAQ clarifying various queries wherein it was also mentioned that TCS needs to be collected at the receipt.

Even after the clarification people were not able to change their methodology and were still collecting TCS at the time of receipt.

Till 31.03.2021, there was no issue as the rate of TCS was same but now from 01.04.2021 when rate of TCS will come back to original rate and discount of 25% will end people are under confusion as to whether they need to collect 0.25% TCS on amount received for sale after 01.04.2021 as they must have collected 0.75% before 01.04.2021 along with invoice.

Legally speaking Income tax department can raise a question for short collection of TCS as legally TCS needs to be collected on receipt and if receipt was after 01.04.2021 TCS needs to be collected at 1% instead of 0.75%.

Hence, Income tax department can raise an interest on remaining 0.25% but for most of the people this amount would not be much but for whom this amount would be large and who don’t want litigation can deposit remaining 0.25% TCS to government.

Alternatively one can even plea that the assessee had not concealed or did any loss to the revenue as the TCS was collected at rates in force at the time of collecting TCS and same was deposited to the government within due time which was earlier than normal time.

Thus, it is upto the assessee to decide whether he want’s to face litigation or deposit the balance amount.