Taxpoint: How to book TCS u/s 206(1H) in books, at the time of Receipt or Invoicing

How to book TCS u/s 206(1H) in books, at the time of Receipt or Invoicing

TCS u/s 206(1H) is applicable with effect from 1st Oct 2020. It is applicable on:

Every person whose turnover in the preceding financial year is more than 10 Cr,
If consideration received from any of its customers in current FY is more than 50 Lakh

Rate of TCS under this section is 0.075% till 31/03/2021 & 0.10% after 01/04/2021.

If the PAN/Aadhar of the buyer is not available, then the TCS rate shall be 1%.

Usually, as per TCS provisions, TCS should be booked at the time of payment or while making an entry in books, whichever is earlier. However, TCS liability u/s 206C(1H) is arising at the time of “Receipt of Sale Consideration” and not at the time of billing.

Now the question arises here is, How to book TCS u/s 206(1H) in books, at the time of Receipt or Invoicing?

What if we book TCS at the time of each and Receipt?

Usually, payment is made on the basis of the invoice.
In this case, since TCS was not booked at the time of billing, this will lead to confusion.
In this case, ideally, we need to raise a debit note for the collection of the TCS amount whenever the payment is received.
In case you have a limited number of buyers, you may choose this option.

What if we book TCS at the time of generating the Invoice?

In this case, the TCS amount will be included in the Invoice itself.
This will be easy for reconciliation as payment is made on the basis of the invoice.

In this regard, we have made a small video, the link of which is given below for reference: