206CQ of the Income Tax Act (2023)

The Income Tax Act of 1961 has many sections and subsections for various modes of income. One of those sections is Form 26AS. Form 26AS deals with TCS(Tax Collected at Source). Section 206CQ comes under Part B of Form 26AS. 

However, there is no section 206CQ. It is a part of Section 26AS.

206CQ is nothing but a TCS deposit challan code. 

Form 26AS deals with all the details of your tax which gets deducted or collected at the source.

It deals with your advance tax and self-assessment tax as well. 

The great thing is that there is no such Section 206 CQ in the Income Tax Act of 1961. It occurs in form 26AS and deals with tax collection at source for remittance under the Liberalised Remittance Scheme. It is a TCS deposit challan. 

Let us know more about 206CQ of the Income Tax Act of India.

What is 206CQ TCS by the bank?

TCS is Tax Collected at Source. The seller needs to pay this tax but gets it from the buyer at the time of purchase. In other words, the seller remits the tax amount to the bank, which he collects from the buyer.

The Liberalised Remittance Scheme (LRS) is a scheme that allows Indians to transfer money to NRIs abroad. You can transfer money to your parents and children abroad up to $250,000 in a financial year.

Under this Liberalized Remittance Scheme (LRS), the Bank collects TCS at 5% on the aggregate remittance amount exceeding Rs. 7 lakhs during a Financial Year. 206CQ of Income Tax Act, is nothing but the deposit challan code of TCS in the bank.

Can I claim a refund on TCS?

On purchasing a high-value product you should pay the tax collected at the source (TCS). The seller of the product collects this tax. The customer has to pay TCS along with the price of goods.

The TCS adds the PAN of the buyer. It adds up to the tax payment of the buyer. Thus, it is a type of advance tax. If you are not liable to pay any tax but are forced to pay TCS because of the cash, you can get the refund after filing your Income Tax Return.

How do I claim a TCS refund on foreign travel?

•  In case you are about to travel abroad, the seller of overseas tour packages has to collect 5% of the total cost (including travel, hotel, local sightseeing, etc.) of the package as TCS.
• If you fail to provide PAN/ Aadhaar, the TCS shall increase to ten percent.
• You need to pay TCS irrespective of your mode of payment, be it cash, debit from the bank account, credit card, or intermediaries like PayPal.
• This TCS acts as an Advance Tax under section 46 AS in your accounts, and you can claim a refund for it while filing your returns.

How can I deduct TCS on purchases?

There are a few ways by which you can reduce your TCS on purchases.

• If you deduct tax as TDS on the goods, you need not pay TCS. That means no tax will have to be collected as TCS when you deduct tax at the source.
• If you import goods into India, these provisions will not be applicable.
• If the TCS credit available is more than your tax liability, you can receive the excess amount as a refund with interest.

Is TCS on LRS refundable?

You can do foreign remittances via the LRS scheme under a minimum exemption without any tax liability. However, if you transfer more funds outside the country under LRS beyond the limit, you are subject to a TCS deduction.

To answer the question of how to claim TCS refund on foreign remittance in ITR, you can transfer up to USD 250,000 in a single financial year under the LRS of the RBI. This limit includes transfers under; money transfers for a personal trip, gifts or donations, foreign travel for employment, medical costs and business trips, and foreign education. If you need to remit beyond this amount, you should have prior permission from the RBI.

You can adjust your tax amount under the new TCS rules against your overall tax liability. You can claim an income tax refund or avail of credit at the time of return filing. Your dealer provides a TCS certificate at the time of deduction, which you can use to claim TCS in your ITR filing.

Who pays the TCS buyer or seller?

The seller deposits the TCS amount in Challan 281(206CQ) within one week of the last day of the month in which he collects the tax. The seller can pay in any branch of RBI, SBI, or any other authorized bank. He can also pay TCS electronically.

What is the penalty for TCS’s late payment?

You should pay your TCS within the due date as the Income Tax Department says. 

If you fail to file within the due date, you must pay the late fees. Filing your TCS after the due date suggests you pay a minimum penalty of Rs 10,000 which may extend to Rs 1,00,000. This penalty added to the late fee is what your total TCS amount is.

Thus, to avoid these situations, pay your TCS within the due date.

What is TCS tax with an example?

TCS means Tax Collected at Source. The seller should pay this TCS tax who collects in turn from the buyer. The goods that require TCS are specified under section 206C of the Income Tax Act, 1961.

Here is an example to better understand the TCS process. If the purchase value of a box of chocolates is Rs. 100, the buyer eventually pays Rs. 20 where Rs. 20 is the tax collected at the source. The seller remits the amount to the designated branch of the bank that has the authorization to receive the payments. The seller is only responsible for collecting this tax from the buyer and not paying it himself.

You may have a question regarding 206cq of income tax act applicability. TCS is applicable when selling goods, transactions, when given a receipt of a sum in cash from the buyer, or when issuing a cheque or draft, whichever mode is paid by the earliest.

This provision is under Section 206C of the Income Tax Act 1961.

FAQS- 206cq of the income tax act

1. Can TCS be adjusted against TDS?

No, you cannot adjust TCS against TDS and vice versa. The points of collection and deduction are very different.

You must understand the difference between TDS and TCS. The tax deducted at source is suitable for an income other than the sale of goods. Moreover, under TDS the buyer of services pays the rest of the amount to the seller. On the other hand, the seller collects TCS, adds the TCS to the invoice, and deposits the TCS to the Government.

So, you cannot adjust TCS against TDS.

2. What is the rate of TCS?

Currently, the tax collection rate (TCS) for the sale of goods is 0.1% of the sale sum exceeding Rs. 50 lakhs. 

3. What is Section 206C(1G)?

Section 206C(1G) of the Income-tax Act, 1961 in India pertains to the collection of tax by a seller of an overseas tour package from the buyer who is purchasing such a package. The seller is required to collect a tax amount equal to 5% of the total cost of the tour package from the buyer.

4. Who is liable to deduct TDS under Section 206CQ?

The seller is liable to deduct the Tax Deducted at Source (TDS) under Section 206C(1G). However, it’s important to understand that TDS is a mechanism through which the tax is collected at the source of income, and the seller, in this case, acts as the collector of this tax on behalf of the government. The seller then remits this collected tax amount to the bank or relevant authority.

Bottomline

Section 206CQ of the income tax act comes under Part B of Form 26AS. Form 26AS deals with Tax Collected at Source(TCS). A Seller collects TCS from the buyer during the purchase and remits the amount to the bank. It has a clause 206CQ which is a TCS deposit challan code. The seller deposits this challan in the bank, for the tax that he has collected during the purchase from the buyer.

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