The board in order to clarify the applicability of TCS where sales consideration was partly received in cash and partly in cheque issued circular 23/2016 on dated 24th june 2016 in the form of Question and Answers as under:

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 lakh 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.2 lakh, 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.

Illustration: Goods worth Rs. 5 lakhs is sold for which the consideration amounting to Rs.2 lakhs has been received in cheque and Rs.3 lakh has been received in cash. Tax is required to be collected under section 206C (1D) only on cash receipt of Rs. 3 lakhs and not on the whole of sales consideration of Rs. 5lakh

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Summary :

• TCS will not be applicable if cash payment does not exceed Rs 2 Lacs.
• Where cash payment exceed the threshold amount i.e Rs 2 Lacs, TCS will be applicable only on the cash part not on whole transaction.