Tax Collected at Source (TCS) is a tax that sellers collect from buyers at the time of sale of specified goods and services. Under the Income Tax Act, 1961, certain transactions attract TCS at predefined rates. With each financial year, the government may revise these rates to align with economic policies and revenue objectives. This blog provides a comprehensive overview of the TCS rates applicable for the financial year 2025-26.
Latest TCS Rates for FY 2025-26
The following table provides the TCS rates applicable for different transactions in FY 2025-26:
| Section | For Payment of | Threshold limit | TDS Rate % | |
| 206C(1) | Sale of Scrap | NA | 1% | |
| 206C(1) | Sale of Tendu Leaves | NA | 5% | |
| 206C(1) | Sale of Timber obtained under a forest lease or other mode | NA | 2% | |
| 206C(1) | Sale of any other forest produce not being Timber or tendu leaves | NA | 2% | |
| 206C(1) | Sale of Minerals, coal lignite, Iron ore by a trader | NA | 1% | |
| 206C(1) | Sale of Alcoholic Liquor for Human Consumption | NA | 1% | |
| 206C(1C) | Lease or license of the Parking lot, toll plaza, mining & quarrying | NA | 2% | |
| 206C(1F) | Sale Value of Motor vehicle whether in cheque or in any other mode of receipt | Rs 10 Lakhs per transaction | 1% | |
| 206C(1G) | Foreign remittance through Liberalised Remittance Scheme (LRS) of exceeding Rs. 10 Lakh in a financial year if the remitted amount is out of loan obtained from any financial institution u/s 80E to pursue any education | NA | 0% | |
| 206C(1G) | Foreign remittance through Liberalised Remittance Scheme (LRS) for education and medical purpose | Rs 10 Lakh | 5% (in excess of Rs 10 lakh) | |
| 206C(1G) | Foreign remittance through Liberalised Remittance Scheme (LRS) in any other case (Like Gift, Investment) | Rs 10 Lakh | 20% (on the entire amount) | |
| 206C(1G) | Selling of overseas tour package | NA | 5% up to 10,00,000 20% above 10,00,000 |
|
| 206CC(1) | Non-Filer of ITR | NA | Twice the TCS Rate or 5% whichever is higher (Maximum Rate will not increase 20%) | |
Read Also: TDS Rate Chart FY 2025-26: Comprehensive Guide to Tax Deduction at Source
Key Changes in TCS for FY 2025-26
While there may not be major changes in TCS rates every year, some critical updates that taxpayers should note for FY 2025-26 include:
- Higher TCS on Foreign Remittances: The rate remains 20% on foreign remittances under LRS for investment or other purposes, unless relief under Double Taxation Avoidance Agreement (DTAA) applies.
- Continuation of 5% TCS on Overseas Tour Packages: Travel companies must collect 5% TCS if the tour package exceeds Rs. 7 lakh.
- TCS on Sale of Goods: Businesses with turnover above Rs. 10 crore in the previous financial year must continue collecting 0.1% TCS on sales exceeding Rs. 50 lakh per buyer.
Who is Responsible for Collecting TCS?
The responsibility for collecting TCS lies with the sellers or service providers, who must ensure compliance with tax provisions. The collected tax must be deposited with the government within the prescribed timelines. Additionally, businesses must file periodic TCS returns (Form 27EQ) to report collections.
Read Also: ITR-U: Updated Income Tax Return – Eligibility, Filing & Time Limits
TCS Exemptions and Lower Rate Certificates
- Exemption for Buyers: If a buyer provides a declaration in Form 27C stating that goods purchased are for manufacturing, processing, or production purposes and not for trading, TCS is not applicable.
- Lower Rate Application: Buyers can apply for a lower TCS rate by obtaining a certificate under Section 206C(9).
Compliance and Due Dates
- TCS must be deposited by the 7th of the following month.
- Quarterly TCS returns (Form 27EQ) must be filed by:
- 15th July (for Q1: April-June)
- 15th October (for Q2: July-September)
- 15th January (for Q3: October-December)
- 15th May (for Q4: January-March)
Read Also: Key Financial and Regulatory Changes Taking Effect from March 1, 2025
Consequences of Non-Compliance
Failure to collect or deposit TCS on time may lead to penalties, interest, and disallowance of expenses under the Income Tax Act. Additionally, businesses failing to file TCS returns within the due date may attract late fees under Section 234E.
Conclusion
Understanding the TCS provisions for FY 2025-26 is crucial for businesses and individuals engaging in taxable transactions. Ensuring timely collection, deposit, and reporting of TCS will help avoid penalties and maintain compliance with tax regulations. Stay updated with changes in tax laws to avoid any last-minute surprises.
For any queries regarding TCS compliance or lower rate applications, consulting a tax professional is advisable.
Read also: New Income Tax Bill 2025: Simplified Taxation, Reduced Litigation, and Economic Impact
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