Section 206C(1H) required sellers to collect Tax at Source (TCS) on the sale of goods when certain thresholds were met. This provision was active from 1 October 2020 until 31 March 2025. From 1 April 2025, TCS under this subsection ceased to apply following the Finance Act, 2025.
WHAT WAS THE RULE
A seller whose total sales, gross receipts, or turnover exceeded Rs 10 crore in the preceding financial year was required to collect TCS from any buyer whose purchases from that seller exceeded Rs 50 lakh in the current financial year.
The TCS rate was 0.1% on the amount exceeding Rs 50 lakh. If the buyer did not furnish PAN or Aadhaar, the rate was 1%.
OVERLAP WITH SECTION 194Q
Section 194Q (TDS on purchase of goods by the buyer) was introduced from 1 July 2021 and covers the same transactions from the buyer side. Under the statute, Section 206C(1H) did not apply if the buyer was liable to deduct TDS under any other provision and had deducted such tax. CBDT Circular No. 13/2021 clarified: where both applied, the buyer s TDS obligation under 194Q took priority.
CURRENT STATUS FROM 1 APRIL 2025
The Finance Act, 2025 added a proviso to Section 206C(1H) providing that the subsection shall not apply from 1 April 2025. Sellers are no longer required to collect TCS on sale of goods under this provision. However, Section 194Q (buyer side TDS) continues to apply.
WHAT BUSINESSES SHOULD DO NOW
Sellers should stop collecting TCS under 206C(1H) from 1 April 2025 onwards. TCS collected for periods up to 31 March 2025 must still be deposited and reported in Form 27EQ. Buyers who had TCS collected can claim credit in their income tax return.
PRACTICAL TIP
Update your billing and ERP systems to remove the 206C(1H) TCS collection logic for invoices dated 1 April 2025 onwards. Ensure that 194Q TDS compliance (buyer side) remains active for purchase transactions exceeding Rs 50 lakh.
TCS on Sale of Goods Under Section 206C(1H): Rules and Status
@ca_karan · 02 Mar 2026 · 2 min read
Karan Malhotra
@ca_karan
Karan is part of the founding editorial team at TaxSocial and writes flagship pieces on tax-law transitions and high-stakes filing decisions. He covers the Income-tax Act 2025 commencement on 1 April 2026, the Tax Year vs Assessment Year vs Previous Year vocabulary shift, capital gains exemptions on sale of house property under Sections 82, 85 and 86 of the new Act, and the cross-year transitional questions practitioners have been asking since the Act was published. His articles are built around the bare Act text, the Income-tax Rules 2026 notified by CBDT, and Section 536 savings clauses that govern how 1961-Act matters are preserved into the new framework. He is a regular contributor on the Section 148 reassessment and dispute-resolution beats.
16 views
·
0 likes
·
0 comments
·
0 saves
Disclaimer: This content is the author's personal opinion and analysis. It does not constitute professional tax or legal advice. Consult a qualified professional for specific advice on your situation.
@ca_karan
Karan is part of the founding editorial team at TaxSocial and writes flagship pieces on tax-law transitions and high-stakes filing decisions. He covers the Income-tax Act 2025 commencement on 1 April 2026, the Tax Year vs Assessment Year vs Previous Year vocabulary shift, capital gains exemptions on sale of house property under Sections 82, 85 and 86 of the new Act, and the cross-year transitional questions practitioners have been asking since the Act was published. His articles are built around the bare Act text, the Income-tax Rules 2026 notified by CBDT, and Section 536 savings clauses that govern how 1961-Act matters are preserved into the new framework. He is a regular contributor on the Section 148 reassessment and dispute-resolution beats.
Comments (0)
No comments yet. Be the first to comment!