Section 206C(1) of the Income Tax Act, 1961 mandates the collection of tax at source (TCS) by sellers related to specific goods. It applies at the time of debiting the amount payable by the buyer or at the time of receipt of such amount, whichever is earlier.
Applicability
| Collection Codes under section 206C | Nature of Payment | TCS Rate |
| A | Alcoholic Liquor for human consumption | 1% |
| B | Timber or any other forest produce | 2% |
| C | Timber obtained under any other mode other than forest lease | 2% |
| E | Scrap | 1% |
| I | Tendu leaves | 5% |
| J | Minerals (coal, lignite, iron ore) | 1% |
Note: Sections – 206CB and 206CC rates reduced from 2.5% to 2%, effective from 1st April 2025.
Persons Responsible for Collecting TCS
The obligation to collect TCS under this section lies with the seller, who may be:
- The Central or State Government
- Local Authorities
- Statutory Corporations
- Companies, Firms, or Co-operative Societies
- Individuals or HUFs having turnover exceeding audit limits under Section 44AB in the preceding financial year
Exemption from TCS
TCS is not required if the buyer provides a declaration in Form 27C stating that the goods are to be used for manufacturing, processing, or producing articles and not for trading. The seller must:
- Collect the form in duplicate
- Submit one copy to the jurisdictional Chief Commissioner or Commissioner of Income Tax
Non-Compliance and Penalties
| Default | Consequence |
| Failure to collect TCS | Treated as assessee-in-default under Section 206C(6A) |
| Delay in depositing TCS | Interest @ 1% per month or part thereof |
| Late filing of Form 27EQ | ₹ 200 per day (Section 234E) |
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