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Published on 6 June 2025

Section 206C(1H) Abolished: No More TCS on Sale of Goods

Big news for everyone dealing with business taxes in India—Section 206C(1H), the rule that made sellers collect TCS (Tax Collected at Source) on the sale of goods, is officially gone from April 1, 2025. If you’ve ever felt tangled up in the web of TCS and TDS, you’re about to breathe a little easier. Let’s break down what this means for you in plain English, with all the details you need to stay compliant and stress-free.

What Was Section 206C(1H), Anyway?

Remember back in October 2020, when Section 206C(1H) first showed up? It required any business with a turnover above ₹10 crore to collect 0.1% TCS from buyers if their annual purchases crossed ₹50 lakh. The idea was to widen the tax net and keep a closer eye on big transactions. But for many, it just meant more paperwork, more confusion, and a lot of double-checking to make sure you weren’t missing both TDS and TCS on the same deal.

The Big Change: Section 206C(1H) Is History

Fast forward to April 1, 2025—Section 206C(1H) is abolished. Gone. You don’t have to worry about collecting TCS on the sale of goods anymore, no matter how big your turnover or how much you sell to a single buyer.

Here’s what this means for you:

  • No more TCS on sale of goods, period.
  • Sellers can stop collecting, depositing, and filing returns for TCS under this section.
  • No more confusion about whether both TCS and TDS apply to the same transaction.
  • All eyes now shift to Section 194Q (TDS on purchase of goods), which is the only rule you need to worry about for these transactions.

Why Did the Government Scrap Section 206C(1H)?

This wasn’t just a random decision. The government listened to businesses and tax professionals who found the overlapping TCS and TDS rules confusing and burdensome. The new Income Tax Bill 2025 is all about simplifying the tax code, making it easier to follow, and cutting out unnecessary compliance headaches. By removing Section 206C(1H), they’ve taken a big step toward a cleaner, more straightforward tax system.

So, What’s the Law Now? Section 194Q Takes Center Stage

With TCS on sale of goods out of the picture, Section 194Q is now the main rule for these kinds of transactions. Here’s what you need to know:

  • The buyer, if their turnover exceeded ₹10 crore in the previous financial year, must deduct TDS.
  • This applies when the buyer purchases goods worth more than ₹50 lakh from a resident seller in a financial year.
  • The TDS rate is 0.1% on the amount above ₹50 lakh.
  • Sellers don’t need to collect TCS anymore for these transactions.

Before and After: What’s Changed Since April 1, 2025

Before April 1, 2025, both TCS (under Section 206C(1H)) and TDS (under Section 194Q) could apply to the same transaction, leading to possible dual compliance. Sellers with turnover above ₹10 crore had to collect TCS, and buyers with turnover above ₹10 crore had to deduct TDS. This overlap created confusion and extra work.

After April 1, 2025, only TDS under Section 194Q applies. Sellers no longer have to worry about TCS on the sale of goods, regardless of their turnover. The only threshold that matters now is the buyer’s ₹10 crore turnover for TDS purposes.

What About Other TCS Provisions?

Don’t worry—this change only affects TCS on the sale of goods under Section 206C(1H). TCS on scrap, tendu leaves, and other items under different parts of Section 206C still stands. So, if you deal in those, keep following the old rules.

Other Recent TCS/TDS Updates

  • New TCS rules for luxury items like watches, art, and yachts kick in from FY 2025-26.
  • The TCS threshold for foreign remittances under the Liberalised Remittance Scheme (LRS) is now ₹10 lakh, up from ₹7 lakh.
  • TCS exemption for education loans under LRS continues.

What Should Businesses Do Now?

  • Stop collecting TCS under Section 206C(1H) from April 1, 2025.
  • Make sure your buyers are ready to handle Section 194Q TDS compliance.
  • Update your accounting and ERP systems—remove TCS modules for sale of goods.
  • Train your finance and compliance teams on the new rules so there are no surprises.

Frequently Asked Questions

  • Q1: Is TCS on sale of goods still applicable in FY 2025-26?

  • A - Nope, it’s gone from April 1, 2025. Only TDS under Section 194Q applies now.

  • Q2: What if I collected TCS in March 2025 but the deposit is due in April 2025?

  • A - You still need to deposit and file returns for any TCS collected up to March 31, 2025. But for sales after April 1, 2025, no TCS applies.

  • Q3: Does this affect TCS on scrap, tendu leaves, or other items?

  • A - No, those TCS rules remain unchanged. Only TCS on sale of goods under Section 206C(1H) is abolished.

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