income tax

Published on 3 June 2025

TCS Rule Changes 2025: What Businesses & Buyers Must Know

If you’re running a business or making big-ticket purchases in India, you’ve probably heard about Tax Collected at Source, or TCS. But with all the recent changes, especially those kicking in from April 1, 2025, it’s easy to get confused. Let’s break down what TCS is, what’s changed, and what you need to know—minus the jargon and with a real-world perspective.

What Exactly Is TCS?

Think of TCS as a little bit of tax that the seller collects from you (the buyer) when you buy certain goods or services. The seller then passes this tax straight to the government. It’s a way for the tax authorities to keep an eye on large transactions and make sure everyone’s playing by the rules.

The Big Shake-Up: What’s New from April 2025?

Here’s where things get interesting. The government has made some sweeping changes to TCS rules, and if you’re used to the old system, you’ll want to pay attention.

No More TCS on General Sale of Goods

Until March 31, 2025, if you were a seller with turnover above ₹10 crore, you had to collect TCS at 0.1% on any sales to a buyer once they crossed ₹50 lakh in a year. That’s gone now. From April 1, 2025, you don’t have to bother with TCS on the general sale of goods at all. This is a huge relief for businesses, as it cuts out a lot of paperwork and double-checking.

Why the Change?

The main reason: to avoid the headache of both TCS and TDS (tax deducted at source) applying to the same transaction. Now, only TDS under Section 194Q will apply, making life simpler for everyone.

TCS on High-Value Luxury Goods Gets a Boost

But don’t celebrate just yet—TCS isn’t disappearing completely. If you’re buying luxury items, there’s a new rule. From January 1, 2025, any single purchase of certain high-end goods above ₹10 lakh will attract TCS at 1%. We’re talking about things like:

  • Expensive cars
  • Luxury watches
  • Artworks and antiques
  • Fancy collectibles (coins, stamps)
  • Yachts, boats, helicopters
  • Designer sunglasses, handbags, shoes, sportswear
  • High-end home theatre systems
  • Horses for racing or polo

So, if you’re splurging on something extravagant, expect to pay a little extra upfront.

No More Higher TCS Rates for Non-Filers

Previously, if a buyer hadn’t filed their income tax returns, sellers had to collect TCS at a higher rate. That’s now history. From April 2025, you don’t need to check whether your buyer is a tax filer or not—everyone gets the same rate. This is a big win for businesses, cutting out a lot of hassle and awkward conversations.

Changes for Foreign Remittances and Education Loans

If you’re sending money abroad or paying for an overseas tour, the TCS threshold has gone up from ₹7 lakh to ₹10 lakh. And if you’re remitting money for education and it’s financed by a loan from a financial institution, there’s no TCS at all. This should make life easier for students and families sending money overseas for studies.

Other Bits You Should Know

If you’re late depositing TCS, the interest is now 1.5% per month, up from 1% earlier.

Salaried folks can claim TCS credit through their employer when calculating TDS, and parents can claim TCS credit for any income earned by their minor children that’s clubbed with theirs.

What Hasn’t Changed?

Not everything is new. Some things stay the same:

  • TCS still applies to certain goods like timber, tendu leaves, scrap, and minerals.
  • Export sales and sales to the government or specified notified entities are still exempt from TCS.
  • TCS is collected when you actually receive payment, not when you issue an invoice.
  • You still need to report TCS in Form 27EQ and hand out certificates to buyers.

What About Software?

Software is a bit of a grey area. Sometimes it’s treated as a good, sometimes as a service. If TDS applies (like under Section 194J), TCS won’t. But if you’re buying high-value packaged software that counts as a luxury good, TCS might kick in. Always check the latest government clarifications if you’re unsure.

TCS vs. TDS: What Applies Now?

Here’s the gist:

  • TCS on general sale of goods? Gone.
  • TCS on luxury/high-value goods? Still there, at 1% above ₹10 lakh per transaction.
  • TCS on foreign remittance and overseas tours? Applies above ₹10 lakh, with some exceptions.
  • TCS on timber, tendu, scrap, etc.? No change—still applies.

Quick FAQs (2025-26)

  • Q - Is TCS on sale of goods still a thing after April 1, 2025?

  • A - Nope, that’s been scrapped.

  • Q - Which goods now attract TCS?

  • A - Only luxury and high-value items above ₹10 lakh per transaction.

  • Q - Do I need to check if my buyer filed their ITR?

  • A - Not anymore—this requirement is gone.

  • Q - What about TCS on foreign remittances for education?

  • A - No TCS if the remittance is for education and paid via a loan from a financial institution.

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