The Finance Bill 2025 proposes amendments to Section 206C of the Income-tax Act to clarify the definition of “forest produce” and revise the tax collected at source (TCS) rates. Currently, TCS at 2.5% applies to timber and other forest produce. Due to ambiguities in the term “forest produce,” it is now defined per any State Act in force or the Indian Forest Act, 1927. The amendment also specifies that only forest produce obtained under a forest lease, excluding tendu leaves and timber, will be subject to TCS. The revised TCS rate for timber and other specified forest produce obtained under a lease is reduced to 2%, effective April 1, 2025.
Budget 2025: Definition of “forest produce” rationalised
Sub-section (1) of section 206C of the Act states that every seller shall collect tax at source from the buyer of goods of certain specified nature at the rates specified in the sub-section.
2. Under sub-section (1) of section 206C of the Act, presently TCS at 2.5 per cent is required to be collected on sale of goods of the following nature: –
(i) Timber obtained under a forest lease
(ii) Timber obtained by any mode other than under a forest lease
(iii) Any other forest produce not being timber or tendu leaves
3. Representations were received that no definition has been provided in the Act for “forest produce” which is creating difficulties in application of the relevant provisions of the Act. Also the provision is being made applicable to traders who are selling such produce. To bring clarity regarding the meaning of “forest produce”, it is proposed that “forest produce” shall have the same meaning as defined in any State Act for the time being in force, or in the Indian Forest Act, 1927.
4. Further, it is proposed that to address the applicability of TCS on traders of forest produce, only such other forest produce (not being timber or tendu leaves) which is obtained under forest lease will be covered under TCS.
5. The amended rate for collection of TCS are as under:-
| S No | Nature of goods | Percentage |
| (1) | (2) | (3) |
| (iii) | Timber or any other forest produce (not being tendu leaves) obtained under a forest lease | Two per cent |
| (iv) | Timber obtained by any mode other than under a forest lease | Two per cent |
6. These amendments will take effect from the 1st day of April 2025
[Clause 67]
Extract of Relevant Clauses of Finance Bill, 2025
Clause 67 of the Bill seeks to amend section 206C of the Income-tax Act relating to profits and gains from the business of trading in alcoholic liquor, forest produce, scrap, etc.
Sub-section (1) of the said section provides that every person, being a seller shall, at the time of debiting of the amount payable by the buyer to the account of the buyer or at the time of receipt of such amount from the said buyer in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, collect from the buyer of any goods of the nature as specified, a sum equal to the percentage specified therein, of such amount as income-tax. In case of timber obtained under a forest lease and timber obtained by any mode other than under a forest lease, the rate for tax collection at source is two and one-half per cent.
It is proposed to amend sub-section (1) of the said section so as to provide that for timber or any other forest produce (not being tendu leaves) obtained under a forest lease and on timber obtained by any mode other than under a forest lease, tax will be required to be collected at source at the rate of two per cent.
It is further proposed to amend the Table in the said sub-section to omit serial number (v) and to provide that tax be collected at source in serial number (iii) of the Table on timber and any other forest produce (not being tendu leaves), obtained under a forest lease.
It is also proposed to amend sub-section (1) of the said section so as to insert an Explanation to provide the meaning of the expression “forest produce”.
These amendments will take effect from 1st April, 2025.
Extract of Relevant Amendment Proposed by Finance Bill, 2025
67. Amendment of section 206C.
In section 206C of the Income-tax Act,
(a) in sub-section (1),––
(i) in the Table,––
(A) against serial number (iii),––
(I) in column (2), for the word “Timber”, the words and brackets “Timber or any other forest produce (not being tendu leaves)” shall be substituted;
(II) in column (3), for the words “two and one-half per cent.”, the words “two per cent.” shall be substituted;
(B) against serial number (iv), in column (3), for the words “two and one-half per cent.”, the words “two per cent.” shall be substituted;
(C) serial number (v) and the entries relating thereto shall be omitted;
(ii) after the proviso, the following Explanation shall be inserted, namely:––
‘Explanation.––For the purposes of this sub-section, “forest produce” shall have the same meaning as defined in any State Act for the time being in force, or in the Indian Forest Act, 1927.’;
