Tax Collected at Source — Section 206C, Section 394 and Every Rate That Matters
TCS inverts the usual withholding logic: instead of the payer deducting tax, the seller, lessor or authorised dealer collects it from the buyer on top of the sale price and deposits it with the government. The regime began with evasion-prone goods — scrap, timber, tendu leaves, minerals, liquor — and has steadily expanded to luxury cars and overseas remittances. If you sell any of these, collection is your obligation, not your customer's.
The Income Tax Act 2025 renumbered the regime from 1 April 2026: the entire Section 206C family now sits in the table under Section 394(1) — goods, leases, motor vehicles and LRS remittances each carry their own serial number, which our chart shows row by row. Where the buyer provides no PAN, Section 397(2) doubles the rate (minimum 5%). Our table keeps the old and new references together because returns and TRACES histories still use 1961 numbering.
The LRS rows are the ones most individuals meet: overseas tour packages attract TCS at the full 20% rate, while medical and self-funded education remittances pay just 2% above the ₹10 lakh threshold. Two provisions have been dropped altogether — the concessional TCS on education funded by a bank loan and the 0.1% levy on large sellers of goods (old Section 206C(1H)) no longer apply. Any motor vehicle priced above ₹10 lakh still carries 1% TCS at the showroom.
Two practical points keep TCS disputes off your desk. First, collected TCS is not a cost — the buyer claims it as credit against their income tax, so collecting correctly protects your customer too. Second, deposit and reporting discipline matters: Form 27EQ is due quarterly with the nature-of-collection codes shown in our table. PGA & Co. handles TCS registrations, returns and reconciliations alongside the deduction-side compliance covered in our TDS Rate Chart.
TCS is collected by the seller/lessor from the buyer at the point of transaction. TDS is deducted by the payer before making a payment. Both are deposited via ITNS 281 (TCS under Minor Head 200). Where both could once apply to a goods transaction, TDS u/s 194Q prevailed; the goods-sale TCS (old 206C(1H)) itself now stands removed.
If the buyer / remitter does not furnish PAN or Aadhaar, TCS must be collected at twice the applicable rate or 5%, whichever is higher, under Sec. 397(2) of IT Act 2025 (old: Sec 206CC of IT Act 1961).
For LRS remittances (206C(1G)), TCS is collected by the authorised dealer at the time of remittance. The buyer can claim credit for TCS against their income tax liability for the year in which the TCS is collected.
TCS paid is reflected in Form 26AS of the buyer/remitter and can be claimed as a credit against their income tax liability. Buyers should verify Form 26AS to ensure the TCS is correctly reported.
Frequently Asked Questions
Who is required to collect TCS?
Sellers of specified goods (scrap, timber, minerals, liquor and others listed in the chart), lessors of parking lots, toll plazas and mines, motor vehicle dealers for vehicles above ₹10 lakh, and authorised dealers and travel operators for LRS remittances and tour packages. The earlier 0.1% collection by large sellers of goods (Section 206C(1H)) has been removed. The obligation sits with the collector — failing to collect makes you liable for the tax yourself.
How much TCS applies when I send money abroad?
It depends on the purpose. Overseas tour packages attract 20% on the full amount. Medical treatment and self-funded education remittances attract 2% only on the amount above ₹10 lakh per year — and remittances for education funded by a bank loan attract no TCS at all. Every other LRS purpose — investments, gifts, maintenance — attracts 20% above the ₹10 lakh threshold. The chart lists each purpose with its rate, threshold and challan code.
Can I get back the TCS collected from me?
Yes. TCS is a prepayment of your income tax, not an extra tax. It appears in your Form 26AS and AIS against your PAN, and you claim it as credit when filing your return — reducing tax payable or generating a refund. Salaried taxpayers can also have LRS-related TCS adjusted against salary TDS by declaring it to their employer.
What happens if the buyer refuses to share their PAN?
Section 397(2) of the IT Act 2025 (old Section 206CC) applies: collection at twice the normal rate or 5%, whichever is higher. The buyer also loses the automatic credit trail, since the collection cannot be mapped to their PAN. In practice insisting on PAN before invoicing is cheaper for everyone than the penal rate.
What is Form 27EQ and when is it due?
Form 27EQ is the quarterly TCS return reporting every collection with its nature-of-collection code (6CA for scrap through 6CR-series codes for newer provisions — each row of our chart shows its code). Due dates are 15 July, 15 October, 15 January and 15 May for the four quarters. After filing, you issue Form 27D certificates to buyers so they can claim credit.