The Finance Bill 2025 proposes the removal of Tax Collection at Source (TCS) under Section 206C(1H) of the Income-tax Act from April 1, 2025. Currently, sellers collecting payments exceeding ₹50 lakh in a financial year must collect TCS at 0.1% on the excess amount. Simultaneously, Section 194Q mandates buyers to deduct Tax Deducted at Source (TDS) at the same rate for similar transactions. This dual application of TCS and TDS creates compliance challenges, as sellers struggle to verify whether buyers have deducted TDS. To simplify tax procedures and reduce compliance burdens, the government has decided to eliminate TCS under Section 206C(1H). Consequently, sellers will no longer be required to collect TCS on high-value sales, while buyers will continue deducting TDS under Section 194Q. These amendments aim to streamline business operations and ease tax compliance, taking effect from April 1, 2025.
Budget 2025: Reduction in compliance burden by omission of TCS on sale of specified goods
Sub-section (1H) of section 206C of the Act, requires any person being a seller who receives consideration for sale of any goods of the value or aggregate of value exceeding Rs 50 lakhs in any previous year, to collect tax from the buyer at the rate of 0.1% of the sale consideration exceeding Rs 50 lakhs, subject to certain conditions.
2. Section 194Q of the Act, requires any person being a buyer, to deduct tax at the rate of 0.1%, on payment made to a resident seller, for the purchase of any goods of the value or aggregate of value exceeding fifty lakh rupees in any previous year .
3. Sub-section (1H) of section 206C mandates tax collection at source (TCS) by a seller while Section 194Q provides for tax deduction at source (TDS) by a buyer on the same transaction.
4. Further, it is provided in sub-section (1H) of section 206C of the Act that the provision will not apply, if the buyer is liable to deduct TDS under any other provision of this Act on the goods purchased from the seller and has deducted such amount. Representations have been received that it becomes difficult for the seller to check whether the buyers have ensured the compliance of TDS deduction under 194Q of the Act. This results in both TDS and TCS being made applicable on the same transaction.
5. Therefore, to facilitate ease of doing business and reduce compliance burden on the taxpayers, it is proposed that provisions of sub-section (1H) of section 206C of the Act will not be applicable from the 1st day of April, 2025.
6. These amendments will take effect from the 1st day of April 2025.
[Clauses 64 & 67]
Extract of Relevant Clauses of Finance Bill, 2025
Clause 64 of the Bill seeks to amend section 194Q of the Income-tax Act relating to tax deduction at source on payment of certain sum for purchase of goods.
The said section provides that any person being a buyer who pays any sum to a resident seller for purchase of any goods of the value or aggregate of value exceeding fifty lakh rupees in any previous year, to deduct 0.1% of such sum exceeding fifty lakh rupees as income-tax, subject to certain conditions.
Sub-section (5) of the said section provides that the provisions of the said sub-section shall not apply to a transaction, inter alia, tax is collectible under the provisions of section 206C other than a transaction to which sub-section (1H) of section 206C applies.
It is proposed to omit reference of sub-section (1H) of section 206C in the said subsection.
This amendment will take effect from 1st April, 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 (1H) of the said section provides that any person being a seller who receives consideration for sale of any goods of the value or aggregate of value exceeding fifty lakhs rupees in any previous year, to collect from the buyer a sum equal to 0.1% of the sale consideration exceeding fifty lakhs rupees as income-tax, subject to certain conditions.
It is proposed to amend the said sub-section so as to insert a proviso to provide that the provisions of this sub-section shall not apply from 1st April, 2025.
It is further proposed to consequentially omit references of sub-section (1H) in subsection (9) and sub-section (10A) of the said section.
These amendments will take effect from 1st April, 2025.
Extract of Relevant Amendment Proposed by Finance Bill, 2025
64. Amendment of section 194Q.
In section 194Q of the Income-tax Act, in sub-section (5), in clause (b), the words, brackets, figures and letters “other than a transaction to which sub-section (1H) of section 206C applies” shall be omitted.
67. Amendment of section 206C.
In section 206C of the Income-tax Act,
(c) in sub-section (1H), after the second proviso, the following proviso shall be inserted, namely:––
“Provided also that nothing contained in the provisions of this sub-section shall apply from the 1st day of April, 2025.”;
(e) in sub-section (9), for the words, brackets, figures and letters “, sub-section (1C) or sub-section (1H)” at both the places where they occur, the words, brackets, figure and letter “or sub-section (1C)” shall be substituted;
(f) in sub-section (10A), for the brackets, figures, letters and word “(1C), (1F) or (1H)”, the brackets, figures, letters and word “(1C) or (1F)” shall be substituted.
