Tax Collected at Source (TCS) – Updated Rates, Thresholds & Compliance under Income-tax Act, 2025
Tax Collected at Source (TCS) is a mechanism under the Indian Income-tax law whereby the seller (collector) collects tax from the buyer at the time of sale of specified goods or services and remits it to the government on the buyer’s behalf. It is governed by Section 206C of the Income-tax Act, 1961, which, effective 1 April 2026, stands consolidated into Section 394 of the new Income-tax Act, 2025.
The TCS Rate Chart for Tax Year 2026-27 consolidates all applicable TCS rates, the corresponding old section references under the 1961 Act, the new section references under the 2025 Act, section codes, and the threshold limits above which TCS becomes applicable. The chart covers a wide range of transactions including sale of goods such as alcoholic liquor, tendu leaves, timber, scrap, and minerals; sale of motor vehicles; foreign remittances under the Liberalized Remittance Scheme (LRS); overseas tour packages; and parking/toll/mining/quarrying contracts.
Key legislative changes effective from 1 April 2026: all TCS provisions previously under Section 206C (sub-sections 1, 1C, 1F, 1G) are now re-enacted under Section 394 of the Income-tax Act, 2025. The rates and thresholds remain largely unchanged, but practitioners and businesses must update their compliance systems to cite the new section numbers in challan filings and returns.
TCS Rate Chart – Tax Year 2026-27 (Income-tax Act, 2025)
| Nature of Collection | Old Section | New Section (2025) | Code | TCS Rate | Threshold |
| Alcoholic Liquor | 206C(1) | 394(1) | 1068 | 2% | No limit |
| Tendu Leaves | 206C(1) | 394(1) | 1069 | 2% | No limit |
| Sale of Timber or any other Forest Produce | 206C(1) | 394(1) | 1070 / 1071 / 1072 | 2% | No limit |
| Sale of Scrap | 206C(1) | 394(1) | 1073 | 2% | No limit |
| Sale of Minerals (Coal, Lignite, or Iron Ore) | 206C(1) | 394(1) | 1074 | 2% | No limit |
| Sale of Motor Vehicle | 206C(1F) | 394(3) | 1075 to 1085 | 1% | ₹10,00,000 (per transaction) |
| Remittance under LRS (Out of loan from specified financial institution) | 206C(1G) | 394(4b) | – | NIL | NIL |
| Remittance – LRS (Education or Medical Treatment) | 206C(1G) | 394(1) [7(a)] | 1086 | 2% | Amount exceeding ₹10,00,000 |
| Remittance – LRS (Other Purposes) | 206C(1G) | 394(1) [7(b)] | 1087 | 20% | Amount exceeding ₹10,00,000 |
| Overseas Tour Package | 206C(1G) | 394(1) | 1088 / 1089 | 2% | No limit |
| Parking / Toll / Mining / Quarrying | 206C(1C) | 394(2) | 1090 / 1091 / 1092 | 2% | No limit |
Important Notes for Compliance
1. Effective Date: All new section references (Section 394) under the Income-tax Act, 2025 apply from 1 April 2026.
2. Higher TCS for Non-PAN/Aadhaar Cases: If a buyer fails to furnish a valid PAN or Aadhaar, TCS must be collected at the higher of: (a) twice the applicable rate, (b) 5%, or (c) 20%.
3. Threshold Calculation: Thresholds are generally computed per seller–buyer pair for the entire financial year, except for Motor Vehicles where the ₹10,00,000 limit applies per transaction.
4. LRS Exemption: Remittances under LRS funded out of a loan from a specified financial institution attract NIL TCS.
FAQs – TCS Rate Chart for Tax Year 2026-27 under the Income-tax Act, 2025
Q1. What is the major change in the TCS provisions under the Income-tax Act, 2025?
Answer: From 1 April 2026, all Tax Collected at Source (TCS) provisions previously contained in Section 206C of the Income-tax Act, 1961 have been consolidated under Section 394 of the Income-tax Act, 2025. While the section numbers have changed, the applicable TCS rates and threshold limits remain largely unchanged.
Q2. Which transactions are covered by the TCS Rate Chart for Tax Year 2026-27?
Answer: The chart covers TCS on the sale of alcoholic liquor, tendu leaves, timber, forest produce, scrap, minerals, motor vehicles, foreign remittances under the Liberalised Remittance Scheme (LRS), overseas tour packages, and parking, toll, mining, and quarrying contracts, along with their respective rates and threshold limits.
Q3. What is the TCS rate on the sale of motor vehicles under the new law?
Answer: TCS is collectible at 1% on the sale of a motor vehicle where the sale consideration exceeds ₹10 lakh per transaction. The per-transaction threshold continues to apply under the Income-tax Act, 2025.
Q4. Is TCS applicable on foreign remittances under the Liberalised Remittance Scheme (LRS)?
Answer: Yes. TCS applies to specified remittances under the LRS. However, remittances financed through a loan obtained from a specified financial institution are exempt from TCS, while education, medical treatment, and other remittances are subject to the prescribed rates and thresholds.
Q5. What happens if the buyer does not provide a valid PAN or Aadhaar for TCS purposes?
Answer: Where the buyer fails to furnish a valid PAN or Aadhaar, TCS must generally be collected at the higher of twice the applicable rate, 5%, or 20%, in accordance with the applicable provisions of the Income-tax Act.
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Disclaimer: This chart is for general reference only and does not constitute professional advice. Verify with the bare Act, official notifications, and your tax advisor before taking any action.
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