Under Section 206C(1H) of the Income Tax Act, sellers were required to collect Tax Collected at Source (TCS) at 0.1% on the sale of goods exceeding ₹50 lakh. However, TDS under Section 194Q also applies to such transactions, leading to situations where both TCS and TDS were inadvertently applied. To address this issue, the Finance Bill 2025 proposes the removal of TCS on the sale of goods, effective from April 1, 2025. This amendment will simplify tax compliance for sellers, provide clarity to buyers, and prevent unnecessary liquidity blockage.
Page Contents
- FAQs – Budget 2025: Reduction in compliance burden by omission of TCS on sale of specified goods
- Q.1 What is the provision of section 206C(1H) of the Act?
- Q.2 What are the transactions eligible for tax collection at source under section 206C(1H)?
- Q.3 What changes are proposed in section 206C(1H) in the Finance Bill, 2025?
- Q.4 How will the amendment benefit the taxpayers?
- Q.5 From which date taxpayer will not be required to collect TCS under this section?
FAQs – Budget 2025: Reduction in compliance burden by omission of TCS on sale of specified goods
Q.1 What is the provision of section 206C(1H) of the Act?
Ans. It provides for collection of tax at source (TCS) on sale of goods at the rate of 0.1% as per present provisions.
Q.2 What are the transactions eligible for tax collection at source under section 206C(1H)?
Ans. Every seller who receives any amount as consideration for sale of any goods (other than goods exported outside India, or goods covered in sub-section (1) or (1F) or (1G) of section 206C) of the value or aggregate of such value exceeding fifty lakh rupees in any previous year shall collect TCS at the rate of 0.1%.
Q.3 What changes are proposed in section 206C(1H) in the Finance Bill, 2025?
Ans. TDS is also applicable u/s 194Q of the Act at the rate of 0.1% of sale consideration at the time of sale of goods. The existing TCS provisions provide that TCS is not to be collected if TDS is deducted on the same transaction. However, at times the collector (seller) is not aware of the fact whether TDS has been done by the buyer on such transaction. This results in both TDS and TCS being applied on the same transaction. It is therefore proposed that provisions of TCS on sale of goods will not be applicable from 01.04.2025 onwards.
Q.4 How will the amendment benefit the taxpayers?
Ans. Removal of TCS on sale of goods would provide certainty to the buyer as well as seller and reduce compliance burden on the seller (collector). This will also result in avoidable blockage of liquidity.
Q.5 From which date taxpayer will not be required to collect TCS under this section?
Ans. From 01.04.2025, the taxpayer is not required to collect TCS under this section.
