The provisions relating to collection of tax at source on specified goods have been restructured under the Income-tax Act, 2025. The earlier Section 206C(1) of the Income-tax Act, 1961 is now covered under Section 394(1) [Table: Sl. No. 1 to 5], effective from 1st April, 2026.
This restructuring aligns various categories of goods under a table-based format, making classification clearer while retaining the existing scope of TCS applicability.
Quick Reference – Section Mapping & Reporting
- New Section (IT Act 2025): Section 394(1)
- Table Reference: Sl. No. 1 to 5
- Nature of Payment: Sale of specified goods
- Earlier Section (IT Act 1961): Section 206C(1)
- Return Form: 27EQ
Applicability of TCS under Section 206C(1)
TCS is required to be collected by the seller on specified goods covered under Section 394(1). The provision applies to transactions relating to:
- Alcoholic liquor for human consumption
- Tendu leaves
- Timber and other forest produce
- Scrap
- Minerals such as coal, lignite, and iron ore
These transactions, which were earlier reported under separate codes and categories, are now consolidated under Table: Sl. No. 1 to 5 of Section 394(1), thereby creating a more structured reporting framework while retaining the existing scope of applicability.
TCS is required to be collected at the time of debiting the amount payable by the buyer or at the time of receipt of such amount, whichever is earlier.
Persons Responsible for Collecting TCS
The obligation to collect TCS lies with the seller, which may include:
- Central or State Government
- Local authorities and statutory corporations
- Companies, firms, and co-operative societies
- Individuals or HUFs whose turnover exceeds the limits specified under Section 63 in the preceding financial year
This ensures that both organized and large-scale sellers are covered under the provision.
Exemption from TCS
TCS is not required to be collected where the buyer furnishes a declaration in Form 127, stating that the goods are to be used for manufacturing, processing, or production purposes and not for trading.
The seller is required to collect the declaration in duplicate and submit one copy to the jurisdictional income-tax authority within the prescribed time.
Non-Compliance and Penalties
Failure to comply with TCS provisions may result in the following consequences:
- Failure to collect TCS: Treated as assessee-in-default under applicable provisions
- Delay in deposit: Interest at 1% per month or part thereof
- Late filing of TCS return: Fee of ₹200 per day
TCS Rates and New Code Mapping
The following table reflects the updated mapping of transactions along with the applicable rates:
| Code | Old Section | Nature of Payment | New Section (IT Act 2025) | Rate |
|---|---|---|---|---|
| 1068 | 206C – A | Alcoholic liquor for human consumption | 394(1) [Table: Sl. No. 1] | 2% |
| 1069 | 206C – I | Tendu leaves | 394(1) [Table: Sl. No. 2] | 2% |
| 1070 | 206C – B | Timber obtained under forest lease | 394(1) [Table: Sl. No. 3] | 2% |
| 1071 | 206C – C | Timber obtained otherwise than under forest lease | 394(1) [Table: Sl. No. 3] | 2% |
| 1072 | 206C – D | Other forest produce (excluding timber & tendu leaves) | 394(1) [Table: Sl. No. 3] | 2% |
| 1073 | 206C – E | Scrap | 394(1) [Table: Sl. No. 4] | 2% |
| 1074 | 206C – J | Minerals (coal, lignite, iron ore) | 394(1) [Table: Sl. No. 5] | 2% |
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