From 01.04.2025, the taxpayer is not required to collect TCS under section 206C(1H).

As of today, Tuesday, April 1, 2025, the provisions of TCS under Section 206C(1H) of the Income Tax Act, 1961 are as follows:

Applicability:

  • This provision applies to a seller whose total sales, gross receipts, or turnover from their business exceeded ₹10 crore in the financial year immediately preceding the financial year in which the sale is made.
  • The TCS is to be collected on the receipt of consideration for the sale of goods exceeding ₹50 lakh in a financial year from a single buyer.
  • TCS is applicable on the amount exceeding ₹50 lakh.
  • The TCS should be collected at the time of the receipt of the amount.

Rate of TCS:

  • The seller is required to collect tax at source (TCS) at the rate of 0.1% on the receipt of the consideration exceeding ₹50 lakh.
  • However, if the buyer fails to provide their Permanent Account Number (PAN) or Aadhaar number, the TCS rate will be 1% instead of 0.1%.

Important Points:

  • This provision was introduced through the Finance Act, 2020 and became effective from October 1, 2020.
  • The threshold of ₹50 lakh is for the entire financial year. All receipts from a particular buyer from April 1st to March 31st are considered for calculating this limit.
  • Exemptions: TCS under Section 206C(1H) is not required to be collected in the following cases:
    • Goods are exported out of India.
    • The goods are covered under other TCS provisions of Section 206C, specifically sub-sections (1) (sale of alcohol, tendu leaves, timber, etc.), (1F) (sale of motor vehicles), and (1G) (foreign remittances).
    • The buyer is the Central Government, a State Government, an embassy, a high commission, a legation, a consulate, or a trade representation of a foreign state, or a local authority.
    • If the buyer is liable to deduct Tax Deducted at Source (TDS) under any other provision of the Income Tax Act on the same transaction and has deducted such amount.
    • On the import of goods into India.
    • Sale of services (TCS is only on the sale of goods).
  • Compliance:
  • Penalty for Non-Compliance: Failure to collect or deposit TCS can lead to penalties and interest.

However, please note a significant upcoming change:

  • As per the information available, Section 206C(1H) is proposed to be removed with effect from April 1, 2025. This means that from the next financial year (2025-26) onwards, sellers will likely not be required to collect TCS on the sale of goods under this particular provision. This change is being introduced to simplify tax compliance and avoid overlaps with TDS provisions under Section 194Q.

Therefore, while Section 206C(1H) is currently in effect as of today’s date (April 1, 2025), its applicability is expected to cease from tomorrow, April 2, 2025, marking the beginning of the new financial year 2025-26.