CMA Intermediate · Direct and Indirect Taxation · Tax Deducted at Source and Tax Collected at Source
Mehta Spirits Ltd. sells alcoholic liquor for human consumption to a trader for ₹8,00,000 on 10 June 2026. Under the Income-tax Act, 2025, the TCS to be collected by the seller is:
TCS is ₹16,000, which is 2% of ₹8,00,000. The Table in section 394(1) fixes 2% for sale of alcoholic liquor for human consumption and imposes no minimum sale value. The ₹10 lakh threshold relates to motor vehicles and notified goods only.
- A₹8,000
- B₹16,000Correct
- C₹40,000
- DNil, as the sum is below ₹10 lakh
Explanation
Sl. No. 1 of the Table in section 394(1) prescribes 2% on sale of alcoholic liquor for human consumption, with no sale-value threshold. TCS = 2% × ₹8,00,000 = ₹16,000. The ₹8,000 option wrongly uses the earlier 1% rate, and the ₹10 lakh threshold applies only to motor vehicles and notified goods.
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