CMA Intermediate · Direct and Indirect Taxation · Tax Deducted at Source and Tax Collected at Source
Under section 394 of the Income-tax Act, 2025, at what rate does a seller collect tax at source on the sale of scrap to a buyer who gives no manufacturing declaration?
The seller collects tax at source at 2% on the sale of scrap under section 394(1), Sl. No. 4. The earlier 1% rate was replaced by 2% with effect from 1 April 2026, so 2% applies to the sale.
- A1%
- B2%Correct
- C5%
- D20%
Explanation
The Table in section 394(1), Sl. No. 4, fixes the TCS rate on sale of scrap at 2%. The 1% rate is the earlier rate, which was substituted by 2% from 1-4-2026, so it is wrong. The 5% and 20% rates apply to other receipts or earlier provisions.
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