Introduction
Tax Collected at Source, commonly called TCS, is a tax collection mechanism where the seller collects a small amount of tax from the buyer at the time of specified transactions. The seller then deposits this tax with the government.
In simple words, TCS is not an extra cost forever. It works like advance tax paid on behalf of the buyer. The buyer can claim its credit while filing the Income Tax Return.
From Tax Year 2026-27, the Income-tax Act, 2025 has reorganised TCS provisions. Earlier, TCS was mainly discussed under Section 206C of the Income-tax Act, 1961. Now, from 1 April 2026, TCS provisions are mainly covered under Section 394 of the Income-tax Act, 2025.
This guide explains TCS in simple language for buyers and sellers, especially for businesses, dealers, traders, travel agents, motor vehicle sellers, and professionals in Greater Noida.
What is TCS?
TCS means Tax Collected at Source.
It means the seller collects tax from the buyer on specified goods or transactions and deposits it with the government.
For example, if a seller sells scrap and TCS applies at 1%, the seller will collect the sale value plus 1% TCS from the buyer. Later, the buyer can claim this TCS credit in Form 26AS or AIS while filing the Income Tax Return.
The Major Shift: What No Longer Applies in 2026
Earlier, sellers with turnover exceeding ₹10 crore had to collect 0.1% TCS on sale consideration exceeding ₹50 lakh from a single buyer under Section 206C(1H).
However, this rule has now been withdrawn.
From 1 April 2025, TCS on general sale of goods under Section 206C(1H) is no longer applicable. Therefore, sellers are no longer required to monitor the ₹50 lakh buyer-wise threshold for normal sale of goods.
However, TDS on purchase of goods by the buyer continues. Under the old law, this was covered under Section 194Q. Under the Income-tax Act, 2025, buyers still need to check the corresponding TDS provision for purchase of goods.
So, the important point is simple:
General sale of goods is no longer covered under seller-side TCS, but buyer-side TDS on purchase of goods continues where applicable.
This change has reduced confusion because earlier both buyer and seller had to track the same transaction from different sides.
Old Act vs New Act: Simple Understanding
| Particulars | Earlier Position | 2026 Position |
|---|---|---|
| Law | Income-tax Act, 1961 | Income-tax Act, 2025 |
| Main TCS section | Section 206C | Section 394 |
| General sale of goods TCS | Section 206C(1H) applied earlier | Withdrawn from 1 April 2025 |
| TCS on specified goods | Continued | Continued under new section structure |
| Foreign remittance and tour package TCS | Section 206C(1G) | Covered under Section 394 |
| TCS certificate | Form 27D under old rules | Form 133 under new rules |
| TCS statement | Form 27EQ under old rules | Form 143 under new rules |
Where TCS Still Applies in 2026
Although TCS on general sale of goods has been removed, TCS still applies to selected goods and transactions. Therefore, sellers should not assume that TCS has completely ended.
TCS still applies mainly on:
- Specified commercial goods
- Parking lot, toll plaza, mine or quarry lease
- Motor vehicles above ₹10 lakh
- Notified luxury goods above ₹10 lakh
- Foreign remittance under LRS
- Overseas tour packages
TCS on Specified Commercial Goods
TCS applies on selected goods such as alcoholic liquor, scrap, timber, forest produce, and certain minerals.
TCS Rate Chart for Specified Goods
| Nature of Goods / Transaction | Standard TCS Rate | Higher Rate if PAN/Aadhaar Not Provided |
|---|---|---|
| Alcoholic liquor for human consumption | 1% | 5% |
| Scrap | 1% | 5% |
| Minerals such as coal, lignite and iron ore | 1% | 5% |
| Timber and other forest produce | 2.5% | 5% |
| Parking lot, toll plaza, mine or quarry lease | 2% | 5% |
For example, if a scrap dealer in Greater Noida sells scrap to a buyer, TCS may apply. The seller should collect TCS, deposit it with the government, file the TCS statement, and issue the certificate to the buyer.
TCS on Motor Vehicles and Luxury Goods
TCS also applies on the sale of:
- Motor vehicles; and
- Notified luxury goods
where the value of a single item exceeds ₹10 lakh.
The TCS rate is generally 1% of the sale consideration.
The important point is that the ₹10 lakh limit applies per vehicle or per item, not on total yearly purchases from the same buyer.
Example
A car dealer sells one car for ₹15 lakh. TCS applies at 1%.
However, if the buyer purchases two different items of ₹8 lakh each, the ₹10 lakh limit must be checked item-wise, not simply on total yearly purchase value, unless the law specifically provides otherwise for that category.
TCS on Foreign Remittance under LRS
TCS also applies when money is remitted outside India under the Liberalised Remittance Scheme, commonly called LRS.
From 2026, the important limit is generally ₹10 lakh for many LRS categories.
Common TCS Position for LRS
| Nature of Remittance | TCS Rate |
|---|---|
| Education or medical treatment | 2% on amount exceeding ₹10 lakh |
| Other LRS purposes | 20% on amount exceeding ₹10 lakh |
| Education loan from specified financial institution | Nil / lower relief as applicable |
For example, if a parent in Greater Noida sends money abroad for a child’s education, the purpose of remittance becomes very important. Education and medical remittances generally get a lower TCS rate compared to other foreign remittances.
TCS on Overseas Tour Packages
TCS also applies on overseas tour packages.
As per the updated 2026 structure, overseas tour packages are subject to TCS. The rate and threshold should be checked carefully at the time of booking because tour package rules have seen frequent changes.
In simple terms, if a person purchases a foreign tour package from a travel operator, the travel operator may collect TCS from the buyer and deposit it with the government. The buyer can later claim the TCS credit in the Income Tax Return.
Higher TCS for Non-Filers
The law also provides a higher TCS rate for certain non-filers of Income Tax Return.
Under the old law, this was covered under Section 206CCA. In simple words, if the buyer has not filed the required Income Tax Return and falls under the specified non-filer category, the seller may have to collect TCS at a higher rate.
Generally, the higher rate is:
- Twice the normal TCS rate; or
- 5%
whichever is higher.
Therefore, sellers should check the buyer’s compliance status before applying the normal TCS rate. The Income Tax Department provides a compliance check facility for this purpose.
When Should Seller Collect TCS?
The seller should collect TCS at the earlier of the following events:
- When the amount is debited to the buyer’s account; or
- When payment is received from the buyer.
This means TCS may apply even on advance payment if the transaction is covered under TCS provisions.
TCS Compliance for Sellers
Sellers should follow a clear compliance process to avoid interest, penalty, and notices.
Step 1: Identify Whether TCS Applies
First, check whether the goods or transaction are covered under TCS. Do not collect TCS on every sale. TCS applies only to specified transactions.
Step 2: Check PAN or Aadhaar
Next, collect the buyer’s PAN or Aadhaar details. If the buyer does not provide PAN or Aadhaar, a higher TCS rate may apply.
Step 3: Check Non-Filer Status
Then, check whether the buyer falls under the higher-rate category for non-filers. This step is important because the seller may be liable if TCS is collected at a lower rate by mistake.
Step 4: Collect TCS on Invoice or Receipt
After that, collect TCS at the correct rate. The invoice should clearly show the sale value, TCS amount, and total payable amount.
Step 5: Deposit TCS with Government
The seller must deposit the collected TCS with the government within the prescribed due date.
Step 6: File TCS Statement
Under the old system, sellers filed quarterly TCS returns in Form 27EQ. Under the Income-tax Act, 2025 and Income-tax Rules, 2026, the new reporting system uses updated forms, including Form 143 for TCS statement.
Step 7: Issue TCS Certificate
The seller must issue the TCS certificate to the buyer. Under the new rules, Form 133 is relevant for TCS certificate.
Due Dates for TCS Compliance
TCS compliance should be done on time. Delay can lead to interest and late fees.
A seller should generally remember these compliance points:
| Compliance | Due Date / Timing |
|---|---|
| Deposit of TCS | Within prescribed monthly due date |
| Quarterly TCS statement | To be filed quarterly |
| TCS certificate | To be issued after filing the TCS statement |
| Correction statement | Can be filed if any mistake is found |
Businesses should always check the latest utility and form availability on the Income Tax portal because the Income-tax Act, 2025 has introduced new form numbers and transition rules.
Rights and Reliefs Available to Buyers
Buyers also have certain rights and reliefs.
1. TCS Credit Can Be Claimed
TCS collected by the seller is reflected in the buyer’s Form 26AS and AIS. The buyer can claim this amount as tax credit while filing the Income Tax Return.
If the buyer’s final tax liability is lower than the TCS amount, the buyer may get a refund after filing the return.
2. No TCS in Certain Manufacturing Cases
If a resident buyer purchases specified goods for manufacturing, processing, production, or generation of power, and not for trading, the buyer can give a declaration to the seller.
Under the old law, this declaration was given in Form 27C. Under the Income-tax Act, 2025 and Income-tax Rules, 2026, this declaration is now linked with Form 127.
Once the seller receives the valid declaration, the seller may not be required to collect TCS on that transaction.
3. Personal Consumption Relief
TCS on specified goods generally does not apply where goods are purchased for personal consumption, subject to conditions.
Therefore, the purpose of purchase is important. A buyer purchasing for business trading and a buyer purchasing for personal use may be treated differently.
Practical Example for Greater Noida Businesses
Suppose a scrap dealer in Greater Noida sells scrap worth ₹5,00,000 to a manufacturing unit.
If the buyer purchases scrap for manufacturing and gives the required declaration, the seller may not collect TCS. However, if the buyer purchases scrap for trading, TCS may apply.
Similarly, if a car dealer in Greater Noida sells a car worth ₹18 lakh, the dealer should check TCS applicability and collect 1% TCS where applicable.
Common Mistakes Sellers Should Avoid
Sellers should avoid these common mistakes:
- Collecting TCS on normal sale of goods even after withdrawal of Section 206C(1H)
- Not checking PAN or Aadhaar
- Not checking non-filer status
- Applying the wrong TCS rate
- Not depositing TCS on time
- Not issuing TCS certificate
- Not reconciling TCS with books, AIS, and portal records
- Treating TCS as business income
TCS is not the seller’s income. It is tax collected from the buyer and deposited with the government.
Common Mistakes Buyers Should Avoid
Buyers should also remain careful.
They should avoid:
- Ignoring TCS shown in Form 26AS or AIS
- Not claiming TCS credit in ITR
- Giving wrong PAN to the seller
- Not giving declaration where eligible
- Treating TCS as final tax
- Not reconciling TCS with purchase records
TCS is adjustable against final tax liability. Therefore, buyers should always check AIS and Form 26AS before filing ITR.
Difference Between TDS and TCS
Many people get confused between TDS and TCS.
| Point | TDS | TCS |
|---|---|---|
| Full Form | Tax Deducted at Source | Tax Collected at Source |
| Who deducts/collects? | Payer deducts tax while making payment | Seller collects tax from buyer |
| Example | Buyer deducts TDS on purchase of goods where applicable | Seller collects TCS on scrap sale |
| Credit available to | Payee | Buyer |
| Shown in | Form 26AS / AIS | Form 26AS / AIS |
In simple words, TDS is deducted by the payer, while TCS is collected by the seller.
Is TCS an Extra Tax?
No, TCS is not an extra final tax.
It is like advance tax collected from the buyer. The buyer can claim credit while filing the Income Tax Return. If the buyer has no tax liability or lower tax liability, the buyer may claim a refund.
Conclusion
TCS under the Income-tax Act is still important, but its scope has changed significantly.
The biggest change is that TCS on general sale of goods under old Section 206C(1H) has been withdrawn. Sellers no longer need to collect 0.1% TCS on normal goods sales exceeding ₹50 lakh from one buyer.
However, TCS still applies to specified goods, motor vehicles above ₹10 lakh, notified luxury goods, foreign remittances, overseas tour packages, and certain leases such as parking lots, toll plazas, mines, and quarries.
From 1 April 2026, businesses should refer to the Income-tax Act, 2025, where TCS provisions are mainly consolidated under Section 394. Sellers should update their billing software, accounting process, and compliance checklist accordingly.
For buyers and sellers in Greater Noida, proper TCS compliance helps avoid notices, interest, and mismatch issues in Form 26AS and AIS.
FAQs on TCS under Income Tax Act
1. What is TCS in simple words?
TCS means Tax Collected at Source. The seller collects tax from the buyer on specified transactions and deposits it with the government.
2. Is TCS applicable on all sales?
No. TCS is not applicable on all sales. It applies only to specified goods and transactions such as scrap, liquor, minerals, motor vehicles above ₹10 lakh, foreign remittance, overseas tour packages, and certain leases.
3. Is TCS on sale of goods still applicable in 2026?
TCS on general sale of goods under old Section 206C(1H) has been withdrawn from 1 April 2025. So, sellers are not required to collect 0.1% TCS on normal sale of goods exceeding ₹50 lakh.
4. Is TDS on purchase of goods still applicable?
Yes. Buyer-side TDS on purchase of goods continues where applicable. Therefore, buyers should check their TDS liability on goods purchases.
5. Which section covers TCS under the Income-tax Act, 2025?
From 1 April 2026, TCS provisions are mainly consolidated under Section 394 of the Income-tax Act, 2025.
6. Can buyer claim TCS credit?
Yes. The buyer can claim TCS credit while filing the Income Tax Return. The credit appears in Form 26AS and AIS.
7. Is TCS refundable?
Yes. If the buyer’s final tax liability is lower than the TCS amount, the buyer can claim refund by filing the Income Tax Return.
8. What happens if buyer does not provide PAN?
If the buyer does not provide PAN or Aadhaar, TCS may apply at a higher rate, generally 5% or as prescribed.
9. What is higher TCS for non-filers?
If the buyer falls under the specified non-filer category, the seller may need to collect TCS at higher of twice the normal rate or 5%.
10. Is TCS applicable on scrap sale?
Yes. TCS generally applies on sale of scrap, unless a valid exemption or declaration applies.
11. Is TCS applicable on car purchase?
Yes. TCS generally applies on sale of a motor vehicle where the value exceeds ₹10 lakh.
12. Is TCS an expense for buyer?
No. TCS is not a final expense. It is tax credit available to the buyer.
13. Which form is used for TCS certificate under the new rules?
Under the new Income-tax Rules, 2026, Form 133 is relevant for the TCS certificate.
14. Which form is used for no TCS declaration by manufacturer?
Under the new rules, Form 127 is relevant where the buyer declares that goods are purchased for manufacturing, processing, production, or generation of power and not for trading.
15. Should a Greater Noida business collect TCS on normal goods sales?
No, not merely because normal goods sales exceed ₹50 lakh. The old general goods TCS provision has been withdrawn. However, TCS may still apply if the transaction falls under specified goods or other covered categories.