Skip to content

CMA Final · Direct Tax Laws and International Taxation · Collection, Recovery and Refund of Tax

Under the Income-tax Act, 2025, a seller of scrap receives Rs 8,00,000 from a resident buyer who is a trader. No declaration of the kind in section 394(2) is available. The seller is required to collect tax at source at the rate given in the Table. What is the amount collected?

The seller collects Rs 16,000. Sale of scrap attracts TCS at 2% under the Table in section 394, with no minimum threshold, so 2% of Rs 8,00,000 is Rs 16,000. The earlier 1% rate no longer applies from 1 April 2026.

  1. ARs 8,000
  2. BRs 16,000Correct
  3. CRs 40,000
  4. DNil, because the receipt is below Rs 10 lakh

Explanation

Sale of scrap (Sl. No. 4) attracts TCS at 2% as substituted w.e.f. 1-4-2026. There is no threshold for scrap. Tax = 2% x 8,00,000 = Rs 16,000. Rs 8,000 uses the old 1% rate, and the Rs 10 lakh limit applies only to motor vehicles and notified goods.

Did you get it right without looking?

One question tells you little. A timed set on Collection, Recovery and Refund of Tax shows your real accuracy, how long you take and where you lose marks.

Practise Collection, Recovery and Refund of TaxFree diagnostic mock

More Collection, Recovery and Refund of Tax questions