If you are purchasing scrap, minerals, or other specified goods for manufacturing or processing, you may not be required to pay TCS (Tax Collected at Source). This benefit is available through Form 27C under Section 206C of the Income-tax Act, 1961.

In this detailed guide, we explain:

• What is Form 27C?

• When is it applicable?

• Who can submit it?

• Step-by-step online filing process

• Due dates & penalties

• Practical compliance tips

What is Form 27C?

Form 27C is a declaration submitted by a buyer to the seller stating that:

• The goods are purchased for manufacturing, processing, or production purposes, and

• The goods will not be used for trading purposes.

Upon receiving valid Form 27C, the seller shall not collect TCS under Section 206C.

Legal Provision – Section 206C

Section 206C of the Income-tax Act, 1961 requires sellers to collect TCS on certain specified goods. However, sub-section 206C(1A) provides relief if Form 27C is furnished.

Goods Covered Under Form 27C

Form 27C is generally applicable for:

• Scrap

• Tendu leaves

• Timber obtained under forest lease

• Forest produce (other than timber and tendu leaves)

• Minerals such as coal, lignite, iron ore

Not Applicable For:

• Motor vehicles

• Alcoholic liquor for human consumption

• Overseas remittance

• TCS on sale of goods u/s 206C(1H)

Eligibility Conditions

To claim non-collection of TCS:

1. Buyer must be a resident.

2. Goods must be used for manufacturing/processing/production.

3. Goods must not be used for trading.

4. Buyer must provide valid PAN.

5. Declaration must be submitted in prescribed format.

Step-by-Step Process – Form 27C Compliance

Step 1: Buyer Fills Form 27C

Buyer must:

• Fill Form 27C in duplicate.

• Mention PAN and purpose of usage.

• Sign and submit to the seller.

Step 2: Seller Verifies the Declaration

Seller should:

• Check PAN validity.

• Ensure goods are covered under Section 206C.

• Verify purpose of usage.

If valid → Do NOT collect TCS.

Online Filing Process of Form 27C (For Seller)

Form 27C is not directly filed by the buyer on the income tax portal. The seller must report it electronically.

Step-by-Step Online Filing:

1. Visit the official TDS/TCS reporting portal of the
   Income Tax Department

2. Login using TAN credentials.

3. Prepare TCS return in Form 27EQ.

4. Report Form 27C declaration details in the TCS return.

5. Upload return through:

   • Income Tax e-filing portal, or

   • Through authorized TIN-FC / NSDL system

6. Submit one copy of Form 27C to jurisdictional CIT (if required under applicable procedure).

Due Date for Submission

Seller must furnish Form 27C details:

? On or before the 7th day of the month following the month in which declaration is received.

Example:
If Form 27C received on 15 April → Submit by 7 May.

Penalty for Non-Compliance

Failure to collect TCS or incorrect handling may result in:

• Interest under Section 206C(7)

• Penalty under Section 271CA

• Prosecution in extreme cases

False declaration by buyer may attract penalty under income tax provisions.

Practical Example

A manufacturer purchases scrap worth ₹25,00,000 for use in production.

Normally:
TCS @ 1% = ₹25,000

If Form 27C is furnished:

• Seller will not collect ₹25,000.

• Seller will report declaration in TCS return.

Result: Immediate working capital benefit to buyer.

Important Compliance Tips

✔ Always collect Form 27C before billing.
✔ Verify PAN through income tax portal.
✔ Maintain proper documentation for assessment.
✔ Ensure goods are not later resold as trading stock.
✔ File TCS return (Form 27EQ) correctly.

Frequently Asked Questions (FAQs)

1. Can a trader submit Form 27C?

No. It is strictly for manufacturing or processing purposes.

2. Is physical submission required?

The declaration is obtained physically, but reporting is done electronically in TCS return.

3. Can Form 27C be submitted after purchase?

Ideally, it should be submitted at the time of purchase to avoid TCS collection issues.