Cash Transaction - Amendment in Section 206C of Income-tax Act - Clarifications
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.
The Board clarifies 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 in the form of question and answer as:
Question 1: Whether tax collection at 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 lak 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.2lakh, 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.
CBDT Circular No. 23/2016, Dated: June 24, 2016