Section 206C of the Income Tax Act, 1961 mandates sellers to collect tax at source (TCS) from buyers on transactions involving specific goods like alcoholic liquor, forest produce, scrap, minerals, and motor vehicles. The provision ensures tax compliance on high-value transactions and prevents revenue leakage.
1. Applicability of TCS Under Section 206C
A. Who Must Collect TCS?
- Sellerswith annual turnover exceeding ₹10 crore in the preceding financial year.
- Includes:
- Companies, firms, LLPs, HUFs (if tax audit applies)
- Government bodies, local authorities, co-operative societies
- Individuals engaged in specified trades (e.g., liquor, scrap, timber)
- Goods Covered Under TCS
| CATEGORY | GOODS | TCS RATE |
| Alcoholic Liquor | Liquor for human consumption | 1% |
| Forest Produce | Tendu leaves | 5% |
| Timber (forest lease) | 2.5% | |
| Other forest produce | 2.5% | |
| Minerals | Coal, lignite, iron ore | 1% |
| Scrap | Waste/recyclable material | 1% |
| Motor Vehicles | Sale above ₹10 lakh | 1% |
| Parking/Toll/Mining | Lease/license income | 2% |
B. Threshold Limits
- Per Buyer Limit: ₹50 lakhin a financial year (TCS applies beyond this).
- Annual Turnover Condition: Seller’s previous year turnover must exceed ₹10 crore.
2. When is TCS Collected?
- At the time of sale:
- When payment is received(cash/cheque/credit).
- When the buyer’s account is debited(whichever is earlier).
- Exemptions:
- Buyer’s declaration (Form 27C): If goods are for manufacturing/processing(not trading).
- Government/embassy purchases.
3. Compliance & Penalties
A. Due Dates
| ACTIVITY | DUE DATE |
| TCS Deposit | 7th of next month (e.g., July 7 for June collections) |
| Quarterly Return (Form 27EQ) | 15th of next month after quarter-end |
| TCS Certificate (Form 27D) | 15 days after filing return |
B. Penalties for Non-Compliance
| DEFAULT | CONSEQUENCE |
| Failure to collect TCS | Penalty = TCS amount + 1% monthly interest |
| Late deposit | 1.5% interest per month |
| Incorrect filing | ₹10,000–₹1,00,000 penalty (Section 271H) |
| Non-filing of return | ₹200/day late fee (Section 234E) |
4. Recent Changes (Budget 2025)
- TCS on LRS increasedfrom 5% to 20% (except education loans).
- TCS on goods removedfor FY 2025-26 (simplification move).
5. Key Takeaways
✅ TCS applies only if seller’s turnover > ₹10 crore & sale > ₹50 lakh per buyer.
✅ Rate varies (1%–5%) based on goods (e.g., liquor 1%, tendu leaves 5%).
✅ Form 27C exempts manufacturing buyers from TCS.
✅ Strict penalties for non-compliance (interest, fines, prosecution).
