What is TCS on sale of goods (Section 206C-1H) and how do I configure it in Zoho Books?

Tax Collected at Source (TCS) is the tax that vendors collect from their customers at the time of sale. The government has introduced a new provision under Section 206C (1H) of the Income Tax Act for collecting TCS on the sale of goods after 1 October 2020.

Who should collect TCS on sale of goods?

The new provision requires you to collect TCS if your turnover has exceeded ₹10 crore in the last financial year and the invoice value of the sale to a customer exceeds ₹50 lakhs in the current financial year.

When is TCS applicable?

The new TCS rates are applicable on the sale amount received after 1 October 2020, when the total sale amount for the fiscal year is greater than ₹50 lakhs.

How does Zoho Books handle TCS?

When TCS is applicable on your sales transactions, Zoho Books will automatically show you the TCS field near the Total in the transaction if the total sales amount for that particular customer’s PAN exceeds ₹50 lakhs in that financial year. You can select the applicable TCS rate and it will be included in the transaction.

Zoho Books calculates the total sales amount by adding all the sent invoices’ amount, and subtracting the written-off amount and the TCS applied on previous invoices.

Total Sales Amount = Sum of sent invoices’ total - Sum of write-off amount - Sum of TCS applied on invoices

What are the TCS rates?

The TCS rate to be collected from a customer or buyer who has a PAN card is 0.1%. However, during the COVID-19 pandemic, the rate was reduced to 0.075% till 31 March 2021.

If the customer or buyer does not have a PAN card, then the applicable TCS rate will be 1%.

How do I configure and apply the TCS rates in Zoho Books?

When you create a transaction, if the total sale amount for that customer’s PAN exceeds ₹50 lakhs in that financial year, you will see the TCS field, where you can create and apply the respective TCS rates. To configure:

  • Create an invoice for your customer in Zoho Books with all the necessary details.
  • In the Total section, click the dropdown near TCS.
  • Click Manage TCS.
Creating TCS

Click + New TCS Tax to create a new tax rate.

Creating TCS
  • Enter the following details:
Field Description
Nature of Collection The reason for collecting TCS and the section under which it is collected.
Rate The percentage of TCS collected.
Tax Name Name of the tax that’s collected. For example, TCS on sale of goods.
TCS Payable Account A liability account used to track the TCS received from the customers.
TCS Receivable Account An asset account used to track the TCS you’ve paid to your vendor.
Start Date The date when the TCS applicable period starts.
End Date The date when the TCS applicable period ends.
Creating TCS
  • Click Save and apply the tax rate. You can also click the Edit icon near the amount and type the TCS rate to override the calculated value.

Insight:TCS is calculated on the Total amount which is inclusive of taxes, shipping charges, discounts and adjustments.

  • Click Save and Send to share the tax invoice with your customer. You can also add other rates and manage them the same way

Insight: Similarly, you will be able to create and apply them them while recording your bills in Zoho Books.

How do I track the TCS payable or receivable?

You will be able to view the TCS payable or receivable in the transaction’s journal and Form 27EQ.

Transaction’s journal

You can view the journal details available below each transaction to view the TCS Receivable or Payable amount.

Form 27EQ

Zoho Books generates the Form 27EQ automatically which you can use while filing your TCS. To view this report:

  • Go to Reports and then Taxes.
  • Click Form No. 27EQ to view the report.

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