Section 206C of the Income Tax Act
Section 206C mandates that sellers of specific goods or services collect tax at the time of sale. The rates and conditions for TCS are clearly defined, with amendments made periodically to ensure better compliance and expand its scope.
Sellers of certain goods must collect tax from the buyer based on the value of the goods sold. The tax is collected at the time of payment or when the amount is debited to the buyer’s account, whichever occurs earlier.
Rates of Tax Collection at Source:
| Sl. No. | Nature of Goods | TCS Rate |
| 1 | Alcoholic Liquor for human consumption | 1% |
| 2 | Tendu leaves | 5% |
| 3 | Timber obtained under a forest lease | 2.00% |
| 4 | Timber obtained by any mode other than under a forest lease | 2.00% |
| 5 | Any other forest produce (except timber or tendu leaves) | 2.00% |
| 6 | Scrap | 1% |
| 7 | Coal, lignite, iron ore | 1% |
| 8 | Motor Vehicles (value exceeding 10 lakh) | 1% |
| 9 | Overseas tour packages (Below 7 lakh in a financial year) | 5% |
| 10 | Overseas tour packages (if exceeding 7 lakh in a financial year) | 20% |
| 11 | Overseas remittance (under LRS less than 10 Lakhs) | 0% |
| 12 | Overseas remittance (under LRS above 10 Lakhs for Education/medical Treatment) | 5% |
| 13 | Overseas remittance (under LRS for Education out of loan obtained) | 0% |
| 14 | Overseas remittance (under LRS above 10 Lakhs other than Education/Medical Treatment) | 20% |
| 15 | TCS on Sale of Goods (Exceeding 50 Lakhs) | 0.10% |
Exemptions and Special Conditions:
Exemptions for Specific Buyers:
Buyers who are residents of India and intend to use the purchased goods for manufacturing or generating power (not for trading) can provide a written declaration to avoid TCS. The exemption is applicable for goods like timber and tendu leaves.
Overseas Remittance:
For remittances till ₹10 lakh no TCS is applicable.
if it exceeds ₹10 lakh in a financial year under the Liberalized Remittance Scheme (LRS), the TCS rate is 5% over and above 10Lakh.
If the amount exceeds ₹10 lakh for non-education or medical purposes, the rate increases to 20%.
Overseas Tour Packages:
For Sellers of overseas tour package, tax to be collected at 5% till Rs. 7,00,000 and at 20% thereafter.
Sale of Goods:
Withdrawn form 1st April 2025.
Key Takeaways:
TCS applies to specified goods and services as outlined in Section 206C.
Sellers are responsible for collecting and depositing TCS within prescribed timeframes
Non-compliance can result in interest, penalties, and expense disallowances.
Recent amendments have widened the scope of TCS, particularly in foreign remittance, e-commerce transactions, lease contracts, and large-value goods transactions.
Complying with TCS provisions under Section 206C is vital for businesses to mitigate legal risks and maintain operational efficiency. Given the frequent amendments to tax laws, businesses must stay informed and ensure timely compliance. Seeking expert assistance from a qualified CA firm can facilitate seamless adherence to TCS requirements.
For specialized tax compliance services and financial advisory, our team of experts is here to assist. Let us handle your tax obligations while you focus on growing your business.