Setting Up Tax Collected at Source (TCS), as per the Provisions of the Income Tax Act, 1961

Business Central has included Tax Collected at Source (TCS) Feature in Indian Localization.

TCS means Tax Collected at Source is one of the methods for tax collection by the government. It follows the principle of ‘You pay while you earn’. While ‘Tax Deducted at Source’ (TDS) requires the payer to deduct tax at source and remit the tax to the Government, ‘Tax Collected at Source’ (TCS) requires the receiver or seller to collect tax at source and remit it to the Government. The purpose of this provision is to eliminate tax evasion in certain trades.

Setting up TCS

TCS has two types of setup.

• Automatic - These setup are done through Tax Engine.
• Manual - These setups are done manually by the business users.

Following is the list of setups that will be pre-configured with the help of Tax Engine

• Tax Types
• Tax Entities
• Components
• Attributes
• Rate Setup

For more information about Auto Setup, see Tax Engine Information.

The following are required to be setup manually

• TCS Rates
• Tax Accounting Period
• T.A.N
• Assessee Code
• TCS Nature of Collection
• Concessional Code
• TCS Posting Setup
• TCS on Customer Master
• TCS on Location Master
• TCS on Company Information
• TCS on State Code

To set up TCS rates

Rate of TCS is defined in combination of TCS nature of collection and assessee code.

1. Choose the icon, enter Tax Type -> TCS -> Action -> Tax Rates, and then choose the related link.

2. Fill in the fields as described in the following table.

   Field	Description
   TCS Nature of Collection	Specifies the nature of collection of TCS.
   Assessee Code	Specifies the assessee code.
   Concessional Code	Specifies the concessional code.
   Effective Date	Specifies the effective date.
   TCS %	Specifies the TCS rate.
   Surcharge %	Specifies the surcharge rate.
   Non PAN TCS %	Specifies the TCS rate in case of non availability of PAN.
   e Cess %	Specifies the eCess rate.
   SHE Cess %	Specifies the SHE Cess rate.
   TCS Threshold Amount	Specifies the threshold amount applicable for TCS.
   Surcharge Threshold Amount	Specifies the threshold amount applicable for surcharge.
   Contract Amount	Specifies the contract amount.

To set up tax accounting period

Tax Accounting period and quarters need to be defined for TCS calculation.

1. Choose the icon, enter Tax Acc. Period Setup, and then choose the related link.

2. Fill in the fields as described in the following table.

   Field	Description
   Code	Enter the valid tax type.
   Description	Specify the description of the tax type.

3. Select the Tax Type -> Action -> Tax Accounting Period -> Create Year, fill the following information and accounting period will be created.

   Field	Description
   Tax Type	Select the valid tax type.
   Starting Date	Specify the starting date of the accounting period.
   No. of Periods	Specify the number of periods.
   Period Length	Specify the length of the period.

To set up T.C.A.N.

Tax Collected Account Number (T.C.A.N.) allotted to a company can be more than one, depending on the number of branch locations from where the company files its returns. All the account numbers allotted to a company need to be captured here.

1. Choose the icon, enter T.C.A.N Nos., and then choose the related link.

2. Fill in the fields as described in the following table.

   Field	Description
   Code	Enter the valid registration number provided by tax department.
   Description	Specify the description of the registration number.

Tipp

It is mandatory to enter the T.C.A.N. on all TCS Transactions.

To set up assessee code

Income Tax Act 1961 defines 'Assessee' as a person by whom any tax or any other sum of money is payable under this Act. The rates of TCS are different for different types of Assessee.

1. Choose the icon, enter Assessee Codes, and then choose the related link.

2. Fill in the fields as described in the following table.

   Field	Description
   Code	Enter the valid Assessee Code, for example, IND, COM.
   Description	Enter the description of the assessee code.
   Type	Select the type of the assessee from drop down list as Company or Others.

Tipp

Type should be selected correctly while creating Assessee codes as it will reflect in eTDS returns.

To set up TCS nature of collection

TCS Nature of Collection represents the various types of payments received for which TCS rates have been specified under the provisions of section 206C of the Income Tax Act 1961.

1. Choose the icon, enter TCS Nature of Collection, and then choose the related link.

2. Fill in the fields as described in the following table.

   Field	Description
   Code	Enter the valid TCS Nature of Collection applicable as per the Income Tax Act, 1961
   Description	Enter the description of the mentioned TCS Nature of Collection.

To set up concessional codes

Concessional codes are used for cases authorized for concessional rates exclusively defined by the government.

1. Choose the icon, enter Concessional Codes, and then choose the related link.

2. Fill in the fields as described in the following table.

   Field	Description
   Code	Enter the valid Concessional Codes applicable as per the Income Tax Act
   Description	Enter the description of the mentioned Concessional Codes

To set up TCS posting setup

Specifies the general ledger account for each TCS Nature of Collection defined in the system. System will update the TCS payable amount in the defined general ledger account.

1. Choose the icon, enter TCS Posting Setup, and then choose the related link.

2. Fill in the fields as described in the following table.

   Field	Description
   TCS Nature of Collection	Enter the valid TCS nature of collection.
   Effective Date	Specifies the starting date.
   TCS Account	Specifies the general ledger account for posting of TCS payable amount.

To set up TCS on customer master

TCS nature of collection and concessional codes need to be defined for each customer that is liable to TCS. Multiple TCS NOC can be attached to one customer.

• To define the TCS Nature of Collection on the Customer Card

  1. Choose the icon, enter Customers -> Customer -> Allowed NOC and then choose the related link.
  2. Assessee Code needs to be filled on the customer master.
  3. PAN needs to be filled on customer master. If no PAN is provided, higher rate of TCS will be deducted.

  4. Fill in the fields as described in the following table.

     Field	Description
     TCS Nature of Collection	Select the valid category from lookup list depending on the kind of product sold to the customer.
     Description	Enter the description of the selected Nature of Collection.
     Default NOC	Mark true if the Nature of Collection needs to be defined as default NOC.
     Threshold Overlook	Place a check mark in this field to overlook the TCS Threshold amount defined in 'Tax Rates'
     Surcharge Overlook	Place a check mark in this field to overlook the Surcharge Threshold amount defined in 'Tax Rates'

• To define the concessional code on customer card

  1. Choose the icon, enter Customers -> Customer -> Customer Concessional Codes and then choose the related link.

  2. Fill in the fields as described in the following table.

     Field	Description
     TCS Nature of Collection	Select the valid Nature of Collection from lookup list depending on the kind of product sold by customer.
     Description	Enter the description of the selected Nature of Collection.
     Concessional Code	Select the valid concessional code from lookup list depending on the kind of product sold by customer.
     Concessional Form No.	Certificate number provided by the customer can be defined to justify the lower tax deduction.

To set up TCS on location master

T.C.A.N. needs to be defined for locations from where the company files its returns.

To set up TCS on company information

• Following information needs to be defined on company information.

  Field	Description
  T.C.A.N No.	Specifies the TCAN of the legal entity.
  P.A.N No.	Specifies the PAN of the legal entity.
  Deductor Category	Specifies the deductor category of the legal entity.
  Circle No.	Specifies circle number.
  Assessing Officer	Specifies the assessing officer.
  Ward No.	Specifies the ward number.

To set up TCS on state code

State Code for eTDS/TCS needs to be defined on States master.

See Also

TCS Transactions

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