How to Configure TCS in Tally Prime (2026)

Tax Collected at Source (TCS) flips the usual TDS relationship — instead of deducting tax when you pay someone, you collect a small amount of tax from your buyer when you sell to them, and deposit it with the government. TCS shows up in two different contexts that often get confused: TCS under GST (mainly for e-commerce operators) and TCS under the Income Tax Act (on specified goods and transactions, like the sale of certain goods above a threshold). Tally Prime supports configuration for both, but they’re set up and reported separately.

This guide walks through both types.

TCS Under GST (E-Commerce Operators)

This applies specifically to e-commerce operators who collect payment on behalf of sellers using their platform — they’re required to collect a small percentage of the net taxable supply value as TCS and deposit it with the government, which sellers can then claim credit for.

Step 1: Enable GST TCS in Tally Prime

1. Gateway of Tally, then F11 (Features), then F3 (Statutory & Taxation)
2. Confirm GST is enabled
3. Look for the option related to TCS under GST (sometimes shown alongside e-commerce operator settings) and set it to Yes
4. Enter the applicable TCS rate, which is set by current GST rules

Step 2: Configure Seller Ledgers (If You’re the E-Commerce Operator)

1. Open the ledger for each seller operating through your platform
2. Mark the ledger as TCS-applicable under GST
3. Tally Prime will calculate TCS on the net value of taxable supplies made through your platform for that seller, based on current rules

Step 3: Record the Transaction and TCS Collected

1. Record the relevant sales/settlement transaction through the appropriate voucher
2. Tally Prime calculates and tracks the TCS amount collected separately
3. This TCS needs to be deposited with the government, and the seller can claim credit for it against their own GST liability, similar in spirit to how TDS credit works

TCS Under Income Tax (Sale of Specified Goods)

This applies to sellers crossing a specified turnover threshold who sell certain notified goods or undertake certain notified transactions, requiring them to collect TCS from the buyer at the time of sale.

Step 1: Enable Income Tax TCS in Tally Prime

1. Gateway of Tally, then F11 (Features), then F3 (Statutory & Taxation)
2. Look for the Income Tax TCS option (this is separate from the GST TCS setting above) and set it to Yes
3. Enter your TAN if not already entered as part of your TDS configuration — see our guide on how to configure and record TDS in Tally Prime, since TDS and TCS often share the same TAN-related setup screens

Step 2: Set Up TCS Nature of Goods/Transaction and Rates

1. Review the pre-configured TCS categories relevant to your business (for example, sale of specific goods above a notified value) and confirm the rate matches current rules, since rates and applicable categories can change
2. Update or create entries if needed

Step 3: Mark Buyer Ledgers as TCS Applicable

1. Open the ledger for buyers who fall under TCS collection requirements
2. Set the relevant TCS applicability and Nature of Goods/Transaction for that buyer
3. Enter their PAN, since transactions with buyers lacking a valid PAN are typically subject to a higher TCS rate

Step 4: Record a Sale with TCS Collection

1. Gateway of Tally, then Vouchers, then F8 (Sales) or the relevant voucher for the transaction
2. Enter the sale amount as usual
3. Add the TCS ledger as a line item — Tally Prime calculates the TCS amount based on the configured rate
4. The buyer pays the sale amount plus the TCS collected, and the TCS amount is tracked separately as payable to the government

Example: You sell goods worth ₹15 lakh to a buyer where TCS applies at a notified rate. Tally Prime calculates the TCS amount on top of the sale value, which the buyer pays in addition to the goods value, and you remit this TCS to the government on their behalf.

Step 5: Generate TCS Reports and File Returns

1. Gateway of Tally, then Display More Reports, then Statutory Reports, then look for TCS-related reports (often grouped near TDS reports)
2. Review TCS collected, deposited, and any pending challan reconciliation
3. Deposit the collected TCS using the relevant challan within the due date
4. File your quarterly TCS return (Form 27EQ) through the income tax e-filing system
5. Issue TCS certificates (Form 27D) to buyers as required

Common Mistakes to Avoid

• Confusing GST TCS (relevant mainly to e-commerce operators) with Income Tax TCS (relevant to sellers of specified goods), since they’re configured and reported completely separately in Tally Prime
• Not updating buyer PAN details, risking a higher TCS rate being applied unnecessarily
• Using outdated TCS rates or thresholds without checking for revisions, since these are revised periodically
• Forgetting to record challan payments back into Tally Prime, leaving your reconciliation reports inaccurate
• Missing the quarterly TCS return deadline, which attracts late filing fees similar to TDS non-compliance

FAQs

Do I need to register separately for TCS, or does my regular GST/PAN cover it? Income Tax TCS generally uses your existing TAN (the same one used for TDS). GST TCS for e-commerce operators is tied to your GST registration as an e-commerce operator. There isn’t typically a separate standalone TCS-only registration for most businesses.

Can the same transaction attract both TDS and TCS? Generally, if TDS is already applicable and deducted on a transaction by the buyer, TCS may not additionally apply on the same transaction under current rules — but this depends on the specific provision involved, so check current rules or consult a tax advisor for your specific scenario.

Is TCS collected from the buyer an additional cost to them, or adjustable? The buyer can generally claim credit for TCS collected from them against their own tax liability, similar to how TDS credit works, so it’s not a permanent additional cost — it’s effectively an advance tax collection.

Does TCS under GST apply to every e-commerce seller? TCS under GST is specifically the responsibility of the e-commerce operator collecting TCS on behalf of sellers using their platform, not something every individual seller separately configures, unless they’re also operating their own e-commerce platform.

How do I know if my business falls under Income Tax TCS requirements for selling goods? This depends on your turnover crossing a notified threshold and dealing in goods or transactions specifically notified under the relevant TCS provisions. Check current income tax rules or consult your tax advisor, since thresholds and notified categories are revised periodically.