How Do I Deduct TCS on Scrap Sale?

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Introduction to Tax Collection at Source (TCS) on Scrap Sales

The government introduced tax collected at source on the sale of scrap to monitor an unorganised market segment. Scrap refers to waste materials resulting from mechanical working or manufacturing processes, as defined in the Income Tax Act.

Exemptions and Procedures for TCS on Scrap Sales

  • Exemption Criteria:

    • TCS is not applicable if the buyer purchases the specified goods for personal consumption.
    • State/central governments are exempt from TCS.
    • TCS does not apply to the import of goods into India.

  • Procedure:

    • If TCS is not to be deducted, the seller must collect form no 27C from the buyer in duplicate at the time of sale and deposit one copy with the Income Tax department by the 7th of the following month.

Calculation and Application of TCS on Scrap Sales

  • Threshold: TCS is applicable when the aggregate value of scrap sales by a seller exceeds Rs. 50 lakh in a financial year.
  • Tax Collection:
    • TCS is levied at a rate of 1% on scrap sales exceeding the specified threshold.
    • Sellers are required to include the TCS amount in the invoice.
    • Senior citizens have an exemption limit of Rs 50,000.
    • The calculation involves tax on the selling price plus GST, with adjustments for previous taxes paid against subsequent invoices.

Compliance Guidelines for TCS Implementation

To ensure compliance with TCS regulations, stakeholders are advised to:

  • Calculate tax amounts accurately.
  • Collect TCS within the specified timelines.
  • Report TCS transactions appropriately to avoid penalties and compliance issues.

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