TCS us 206C1D applicable on cash component of payment only. In case of part payment in cash and part in cheque Threshold Limit apply on cash part only

TCS us 206C1D applicable on cash component of payment only

Circular No. 23/2016

F. No.370142/17 /2016-TPL
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
(TPL Division)

New Delhi, dated the 24th June, 2016

Subject: Amendment in Section 206C of the Income-tax Act vide Finance Act 2016 – Clarifications  regarding.

In order to curb the cash economy, Finance Act 2016  has  amended section 206C of the Income-tax Act to provide that  the seller shall collect  tax  at the rate of one per cent from the purchaser on sale in cash of certain goods or provision  of  services  exceeding two  lakh  rupees.  Subsequent  to  the  amendment, a number of representations were received  from  various  stakeholders  with regard to  the scope of  the provisions and  the  procedure to be  followed  in case of the amended provisions of Section 206C of the Act. The  Board,  after examining the representations of the stakeholders, issued FAQs vide circular.No.22/2016 dated 8th June, 2016. The Board has  further  decided  to clarify the  issue as regards applicability of the provisions relating to levy of TCS where the sale consideration received is partly in cash  and  partly  in cheque by issue of an addendum to  the above circular   in the  form of question and answer as under:

Question 1: Whether tax collection t source under section 206C(1D)  at the rate of 1% will apply in cases where the sale consideration received  is   partly in cash and partly in cheque and the cash receipt is less than two lakh rupees.

Answer:   No. Tax collection at source will not be levied if the  cash receipt does not exceed two lakh rupees even if the sale consideration exceeds two lakh rupees.

Illustration: Goods worth Rs. 5 lakhs is sold for which the consideration amounting to Rs.4 lakhs has been received in cheque and Rs. 1 lakh has been received in cash. As the cash receipt does not exceed Rs.2 lakh, no tax is required to be collected at source as per section 206C (1D).

Question 2: Whether  tax collection  at source under section 206C (1D) will apply only to cash component or in respect of whole of sales consideration.

Answer: Under section 206C (1D), the tax is required to be collected at source on cash component of the sales consideration and not on the whole of sales consideration.

Illustration: Goods worth Rs. 5 lakhs is sold for which the consideration amounting to Rs.2 lakhs has been received in cheque and Rs.3 lakh has been received in cash. Tax is required to be collected under section 206C (1D) only on cash receipt of Rs. 3 lakhs and not on the whole of sales consideration of Rs. 5lakh.

(Pitambar Das)
Director  (TPL-III)