The Finance Bill 2025 brings significant changes to Section 206C(1) concerning the tax collection at source (TCS) on the sale of specified goods, particularly “forest produce.” The term “forest produce” has been clearly defined to align with the Indian Forest Act, 1927, or the relevant state laws. The scope of forest produce eligible for TCS is clarified, now applying only to those obtained under a forest lease. Previously, TCS was applicable to all forest produce. The rate of TCS on the sale of timber and other forest produce (excluding tendu leaves) obtained under a forest lease is reduced from 2.5% to 2%. These changes will be effective from April 1, 2025, streamlining the tax collection process and providing clearer guidelines for taxation on forest products.
Page Contents
- FAQs: Definition of “forest produce” rationalized – Budget 2025
- Q.1 What are the major provisions of section 206C(1) of the Act? [TCS on sale of specified goods]
- Q.2 What are the changes brought in Finance Bill, 2025 in context of section 206C(1) of the Act?
- Q.3 How has the term “forest produce” has been defined in the Act ?
- Q.4 What are the other changes made in relation to TCS on “forest produce”?
- Q.5 What will be rate of TCS for sale of forest produce (other than timber and tendu leaves) under a forest lease?
- Q.6 From when this change will take place?
FAQs: Definition of “forest produce” rationalized – Budget 2025
Q.1 What are the major provisions of section 206C(1) of the Act? [TCS on sale of specified goods]
Ans. Section 206C(1) mandates the seller to collect tax at source (TCS) from buyer, at specified rates, on sale of specified goods such as alcoholic liquor, timber, tendu leave, any other forest produce etc.
Q.2 What are the changes brought in Finance Bill, 2025 in context of section 206C(1) of the Act?
Ans. Three major changes are brought in section 206C(1) of the Act:
(i) “forest produce” has been defined.
(ii) Scope of forest produce eligible for TCS has been clarified: Earlier, sale of forest produce was liable for TCS, now sale of “any other forest produce under a forest lease” will be liable for TCS.
(iii) Rate of TCS on sale of timber or any other forest produce (not being tendu leaves) obtained under a forest lease and in case of timber, obtained by any other mode, has been reduced from 2.5% to 2%.
Q.3 How has the term “forest produce” has been defined in the Act ?
Ans. Forest produce has been assigned same meaning as provided any State Act for the time being in force, or in the Indian Forest Act, 1927.
Q.4 What are the other changes made in relation to TCS on “forest produce”?
Ans. Now only such forest produce (other than timber or tendu leaves) which are obtained under a forest lease will be liable for TCS.
Earlier, the TCS was applicable on all kind of sale of forest produce.
Q.5 What will be rate of TCS for sale of forest produce (other than timber and tendu leaves) under a forest lease?
Ans. TCS will henceforth be collected at the rate of 2% instead of present rate of 2.5%.
Q.6 From when this change will take place?
Ans. This provision will apply from the 1.4.2025.
