The amendment to Section 394(1), effective from 01.04.2026, rationalizes Tax Collected at Source (TCS) rates across various transactions to simplify compliance and standardize tax structures. Key changes include increasing TCS on sale of alcoholic liquor, scrap, and minerals like coal, lignite, and iron ore from 1% to 2%, while reducing the rate on tendu leaves from 5% to 2%. For remittances under the Liberalised Remittance Scheme (LRS) exceeding Rs. 10 lakh, the TCS rate for education and medical purposes has been reduced from 5% to 2%, while the 20% rate for other purposes remains unchanged. Additionally, TCS on overseas tour packages has been significantly simplified, replacing the earlier dual-rate structure (5% up to Rs. 10 lakh and 20% beyond) with a flat 2% rate. These changes aim to streamline tax collection, reduce complexity, and provide relief in specific sectors while maintaining revenue neutrality.
Rationalization of TCS Rates [Section 394(1) amended w.e.f. 01.04.2026
Rationalisation of TCS Rates has been done as follows:-
| Sl. No. | Nature of Receipt | Before 01.04.2026 Current Rate | After 01.04.2026 Amended Rate |
| 1. | Sale of alcoholic liquor for human consumption. | 1% | 2% |
| 2. | Sale of tendu leave. | 5% | 2% |
| 3. | Sale of Scrap. | 1% | 2% |
| 4. | Sale of minerals, being coal or lignite or iron ore. | 1% | 2% |
| 5. | Remittance under the Liberalised
Remittance Scheme of an amount or aggregate of the amounts exceeding Rs.10 Lakh. |
(a) 5% for purposes of education or medical treatment.
(b) 20% for purposes other than education or medical treatment. |
(a) 2% for purposes of education or medical treatment.
(b) 20% for purposes other than education or medical treatment. |
| 6. | Sale of “overseas tour programme package” including expenses for travel or hotel stay or boarding or loading or any such similar or related expenditure. | (a) 5% of amount or aggregate of amounts up to Rs. 10lakh.
(b) 20% of amount or aggregate of amounts exceeding Rs. 10 lakh. |
2% |
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Compiled By: Sachin Aggarwal (Tax Advocate), 17, Major Shiv Dev Singh Marg, Nr. Rose Garden, Civil Lines, Ludhiana – 141001, Email:- advocate.sachin@hotmail.com
Disclaimer: opinions belong solely to the author and do not necessarily reflect those of any affiliated organization
