The provisions relating to collection of tax at source on sale of specified high-value goods have been restructured under the Income-tax Act, 2025. The earlier Section 206C(1F) of the Income-tax Act, 1961 is now covered under Section 394(1) [Table: Sl. No. 6.D(a) and 6.D(b)], effective from 1st April, 2026.
This restructuring expands the scope of the provision beyond motor vehicles to include notified luxury goods, thereby strengthening reporting and compliance requirements in relation to high-value transactions.
Quick Reference – Section Mapping & Reporting
- New Section (IT Act 2025): Section 394(1)
- Table Reference:
- Sl. No. 6.D(a) – Motor Vehicles
- Sl. No. 6.D(b) – Luxury Goods
- Nature of Payment: Sale of specified high-value goods
- Earlier Section (IT Act 1961): Section 206C(1F)
- Return Form: 27EQ
- Rate: 1%
Applicability of TCS under Section 206C(1F)
TCS is required to be collected where a seller receives consideration for the sale of a motor vehicle or notified luxury goods exceeding the prescribed threshold limit. The applicability is determined on a transaction basis and applies irrespective of whether the goods are purchased for personal or business purposes.
The responsibility to collect TCS lies with the seller receiving consideration for such specified goods.
Threshold Limit
TCS under this section becomes applicable where the sale consideration exceeds:
- ₹10,00,000 per transaction
The threshold applies separately to each eligible transaction.
Scope and Coverage
The section covers both motor vehicles and specified luxury goods notified under the Act. While motor vehicles continue to remain one of the primary categories, the scope has now expanded to include several premium and lifestyle goods.
Covered goods include:
- Motor vehicles
- Wrist watches
- Art pieces such as antiques, paintings, and sculptures
- Collectibles such as coins and stamps
- Yachts, rowing boats, canoes, and helicopters
- Sunglasses
- Handbags and purses
- Shoes
- Sportswear and sports equipment such as golf kits and ski-wear
- Home theatre systems
- Horses for racing and polo
This wider classification ensures that high-value discretionary spending is appropriately brought within the tax reporting framework.
Time of Collection
TCS is required to be collected at the earlier of:
- At the time of receipt of consideration
- At the time of debiting the buyer’s account
This ensures timely collection irrespective of accounting treatment or payment structure.
Rate of TCS
TCS shall be collected at the rate of 1% on the sale consideration of such goods. The rate applies uniformly across motor vehicles and notified luxury goods covered under this section.
Where PAN is not furnished, higher rate provisions may apply in accordance with the applicable provisions of the Act.
Who is Required to Collect TCS?
The responsibility to collect TCS lies with the seller of such specified goods. Depending upon the nature of the transaction, this may include:
- Motor vehicle dealers
- Luxury goods dealers
- Retailers and distributors
- Other persons engaged in sale of specified high-value goods
The applicability is transaction-based and does not depend upon the category of buyer.
Transactions Not Covered
Certain transactions may fall outside the scope of this section:
- Transactions below the prescribed threshold limit
- Dealer-to-dealer transactions for resale in ordinary course of business
- Other exclusions as may be prescribed under applicable provisions
No exemption is available through Form 27C under this section.
Consequences of Non-Compliance
Failure to comply with TCS provisions may result in:
- Interest liability for delay in collection or deposit
- Penalties under applicable provisions
- Compliance notices from the Income-tax Department
- Other consequences prescribed under the Act
Timely collection, deposit, and reporting in Form 27EQ are therefore essential for proper compliance.
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