Finance Bill 2025: Major TCS Reforms & What Businesses Must Know

Section 206C(1H): Gone for Good

For the last few years, sellers with over ₹10 crore in turnover had to collect 0.1% TCS on receipts from selling goods if a buyer’s purchases crossed ₹50 lakh in a year. There were some exceptions—exports, government purchases, and certain goods didn’t count. During the pandemic, the rate even dipped to 0.075% for a while. Every month, sellers scrambled to deposit TCS by the 7th, and Form 27EQ became a regular part of compliance.

But as of April 1, 2025, all of that is gone. No more TCS on goods sales under Section 206C(1H). No more monthly deposits. No more invoice-level TCS calculations. And you can say goodbye to Form 27EQ for this section. The government’s message is clear: let’s make tax compliance easier and get rid of unnecessary overlaps.

Other Major Changes in the Finance Bill 2025

Sections 206CCA and 206AB have also been scrapped. These sections used to enforce higher TCS/TDS rates for people who didn’t file their returns. Now, that extra headache is gone too.
No more TCS and TDS overlap. Before, sellers had to worry about both TCS (Section 206C) and TDS (Section 194Q) on the same transaction. Now, only TDS under Section 194Q remains for buyers.

What’s New? TCS on Luxury Goods

The government isn’t dropping TCS altogether. Instead, they’re focusing on luxury and high-value items. According to CBDT Notification No. 35/2025, sellers now need to collect TCS on things like:

Yachts, helicopters, and private jets
Artworks, antiques, and luxury watches
Branded footwear
Home theaters and premium sports equipment
Racing and polo horses

So, if your business deals in these high-ticket items, keep an eye out for the new rules.

Liberalized Remittance Scheme (LRS) Updates

If you or your clients send money abroad, there’s good news. The threshold for TCS under LRS has gone up from ₹7 lakh to ₹10 lakh. Plus, if you’re sending money for an education loan (under Section 80E(3)(b)), you’re now fully exempt from TCS.

Forest Produce: A Small But Notable Change

For those in the timber business, the TCS rate on timber (other than tendu leaves) is now 2% instead of 2.5%. The definitions have also been updated to match the Indian Forest Act, 1927.

What Does This Mean for Businesses?

The Upside

Less compliance hassle: No more tracking TCS on every invoice or making monthly deposits for Section 206C(1H).
Better cash flow: Since you’re not collecting TCS, there’s no working capital stuck with the government.
Simpler invoicing: You can finally remove those TCS lines from your bills.

But Don’t Forget TDS

Buyers still need to deduct 0.1% TDS under Section 194Q if their purchases from a seller exceed ₹50 lakh in a year. So, while sellers get some relief, buyers still have compliance to manage.

What Should You Do Next?

Update your accounting software. Remove TCS modules and adjust invoice formats.
Revise your compliance processes. Stop filing Form 27EQ for this section and discontinue TCS collection.
Let your customers know. Communicate these changes and make sure your finance team is up to speed.
Watch out for luxury goods TCS. If you sell high-value items, make sure you’re following the new TCS rules.

Plan for LRS transactions. With the higher threshold, you can optimize your overseas remittances.