Debtors TCS Applicability as on 30-09-2020

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This discussion clarifies whether Tax Collected at Source (TCS) should be charged on customer balances receivable as of 30-09-2020. The consensus is that TCS is not applicable to outstanding balances on a specific date. TCS is triggered by the receipt of payment for goods or services when the total receipts from a customer exceed £50 lakh within the financial year. Therefore, TCS should only be applied prospectively to new transactions and payments received after the threshold is met.

DEEPAK GAUTAM

DEEPAK GAUTAM (Querist)
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27 October 2020 Dear Sir,

Our some customers cross the limit of TCS Rs.50 Lakh in current Financial year. And our some ledger have a balance receivable with customer as on 30-09-2020.

We had been starting to charge the TCS on customer invoice whose receivable amount more than 50 Lakh in current financial year.

Now, i want to know about that, should we charge TCS on balance receivable from customer as on 30-09-2020?

Kindly revert asap.

DEEPAK GAUTAM

DEEPAK GAUTAM (Querist)
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28 October 2020 Awaiting for response.

Aashok Kumar Sharma online

Aashok Kumar Sharma

(Expert)
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06 July 2024 No, you should not charge TCS (Tax Collected at Source) on the balance receivable from customers as on 30-09-2020. TCS is applicable on the receipt of consideration for sale of goods or provision of services, exceeding Rs. 50 lakhs in a financial year.

Here’s why you shouldn't charge TCS on the balance receivable:

1. **Point of Taxation**: TCS is triggered at the time of receipt of the consideration for the sale of goods or provision of services. It is not applicable on amounts outstanding or receivable as of a particular date, such as 30-09-2020.

2. **Financial Year Consideration**: TCS is applied on transactions occurring within the current financial year where the aggregate receipt from a customer exceeds Rs. 50 lakhs. It does not retrospectively apply to outstanding amounts from previous financial years or as of a specific date.

3. **Legal and Practical Considerations**: Charging TCS on balances as of 30-09-2020 would not comply with the legal requirements of the TCS provisions under the Income Tax Act, which focus on transactions and receipts within the current financial year.

Therefore, TCS should be applied prospectively on invoices issued and payments received during the current financial year, once the customer’s aggregate transactions exceed the threshold of Rs. 50 lakhs. Ensure compliance with TCS provisions as per the Income Tax Act and consult with a tax advisor if needed for specific circumstances.

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