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Published on 3 June 2025

Section 206C(1H) Scrapped from April 2025 – What It Means for You

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

Let’s rewind a bit. Back in October 2020, Section 206C(1H) was brought in to widen the tax net. If your business had a turnover above ₹10 crore, you had to collect Tax Collected at Source (TCS) at 0.1% on any receipts from a buyer exceeding ₹50 lakh in a financial year. The idea was to keep tabs on big transactions and make sure everyone was in the tax loop.

What’s Changing from April 2025?

Here’s the headline: Section 206C(1H) is being scrapped. From April 1, 2025, you no longer need to collect TCS on the sale of goods, no matter how big the sale or your turnover. That’s right—no more TCS on regular goods sales. This move is all about making life easier for businesses and cutting out double work.

But wait, there’s more:

  • Section 194Q (TDS by buyer) is still in play. Buyers must deduct TDS at 0.1% on purchases above ₹50 lakh from a resident seller in a year.
  • Section 206CCA (higher TCS for non-filers) is also being removed.
  • TCS on specified goods (like liquor, tendu leaves, scrap, minerals, forest produce) continues under Section 206C(1), but with updated rates and definitions.

Why Is the Government Making This Change?

Honestly, it’s a relief for many. Here’s why the government decided to pull the plug on Section 206C(1H):

  • Simpler Compliance: No more juggling between TDS and TCS on the same transaction. Businesses were often stuck not knowing if the buyer had already deducted TDS, leading to both TDS and TCS being applied—double trouble!
  • Less Paperwork: Fewer forms, less tracking, and no more headaches over TCS reconciliation.
  • Better Cash Flow: No more blocking funds as TCS, which you’d have to claim back later.
  • Ease of Doing Business: The government wants to make running a business in India smoother and less bureaucratic.

What Should You Do Now?

If you’re running a business or managing accounts, here’s your action plan:

  • Update Your Systems: Remove automatic TCS calculations from your billing and accounting software for sales of goods.
  • Inform Your Customers: Let your buyers know—no more TCS on goods from FY 2025-26.
  • Train Your Team: Make sure your finance and accounts folks are up to speed with the new rules.
  • Talk to Your Tax Advisor: Double-check that your processes are aligned with the latest law and you’re not missing anything.

Quick FAQs

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

  • A: No, TCS under Section 206C(1H) is not applicable from April 1, 2025.

  • Q: Do I need to collect TCS if my turnover exceeds ₹10 crore?

  • A: No, the requirement to collect TCS on sale of goods is gone for all sellers.

  • Q: What about TDS under Section 194Q?

  • A: Section 194Q is still there. Buyers must deduct TDS at 0.1% on purchases above ₹50 lakh from a resident seller per year.

  • Q: Are there any TCS provisions still in force?

  • A: Yes, TCS continues for certain specified goods (like liquor, tendu leaves, scrap, minerals, forest produce) under Section 206C(1), with revised rates and rules.

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