TCS Rates & Provisions 2026-27 — Tax Collected at Source Under Income Tax Act 2025

Last updated: 1 April 2026  |  Applicable for AY 2026-27 (FY 2025-26)  |  By CA V. Viswanathan, FCA, ACS, CFE, IBBI Registered Valuer (IBBI/RV/03/2019/12333)

What Is TCS — How It Works

TCS operates on the sell side of a transaction. The seller (or collector) charges TCS over and above the sale price and deposits the collected tax with the Central Government. The buyer receives a TCS certificate (Form 27D) and claims credit for the amount while filing their income tax return.

Key characteristics of TCS:

• The seller/collector is responsible for collecting and depositing TCS — not the buyer.
• TCS is collected at the time of receipt of payment or debiting the buyer’s account, whichever is earlier.
• The buyer bears the TCS amount as an addition to the purchase price but gets full credit in their income tax return.
• TCS collected must be deposited with the government by the 7th of the following month.
• TCS collected appears in the buyer’s Form 26AS and Annual Information Statement (AIS).

Complete TCS Rate Chart — AY 2026-27 (FY 2025-26)

Section	Nature of Transaction	TCS Rate	Threshold / Condition
206C(1)	Sale of scrap	1%	All sales
206C(1)	Sale of minerals (coal, lignite, iron ore)	1%	All sales
206C(1)	Sale of timber (forest produce)	2.5%	All sales
206C(1)	Sale of tendu leaves	5%	All sales
206C(1)	Sale of any other forest produce (not timber/tendu)	2.5%	All sales
206C(1)	Parking lot / toll plaza / mining and quarrying (lease/licence)	2%	All payments
206C(1C)	Sale of motor vehicle	1%	Vehicle value exceeding ₹10,00,000
206C(1F)	Overseas tour package	5% up to ₹7L; 20% above ₹7L	Per buyer per annum (aggregate)
206C(1G)	LRS remittance — education (loan-funded)	0.5% above ₹7L	₹7,00,000 annual aggregate threshold
206C(1G)	LRS remittance — education (self-funded) / medical	5% above ₹7L	₹7,00,000 annual aggregate threshold
206C(1G)	LRS remittance — all other purposes (investment, gifts, travel, etc.)	20% above ₹7L	₹7,00,000 annual aggregate threshold
206C(1H)	Sale of goods (by seller with turnover > ₹10 Cr)	0.1%	Receipt exceeding ₹50,00,000 p.a. per buyer
206CCA	Higher TCS for non-filers	Twice the applicable rate or 5%, whichever is higher	Non-filer for 2 preceding years with TDS/TCS > ₹50,000 each year

TCS on Specified Goods — Scrap, Minerals, Timber

Section 206C(1) is the original TCS provision covering the sale of specified goods. The seller of the following goods must collect TCS from the buyer:

• Scrap: 1% on all sales. “Scrap” means waste and scrap from the manufacture or mechanical working of materials which is not usable as such but is used for re-processing.
• Minerals: Coal, lignite, and iron ore — 1% on all sales.
• Timber: Obtained under a forest lease — 2.5%. Other forest produce (other than timber and tendu leaves) — 2.5%. Tendu leaves — 5%.
• Parking lot, toll plaza, mining/quarrying leases: 2% of the lease/licence fees.

Exemption: No TCS is required if the buyer furnishes a declaration that the goods are for manufacturing, processing, or power generation purposes (not for trading) and provides evidence of filing returns for the preceding 3 years with TCS credit claims. The seller must retain this declaration and report it.

TCS on Motor Vehicles Above ₹10 Lakh — Section 206C(1C)

The seller (usually the automobile dealer) must collect TCS at 1% on the sale of any motor vehicle where the sale consideration exceeds ₹10,00,000. Key points:

• Applies per vehicle — the ₹10 lakh threshold is checked for each vehicle, not aggregate purchases.
• Covers cars, SUVs, luxury vehicles, and commercial vehicles with value above ₹10 lakh.
• TCS is collected on the entire sale amount, not just the excess over ₹10 lakh.
• Two-wheelers and three-wheelers are generally not covered as their value rarely exceeds ₹10 lakh.
• If the buyer is a government entity, embassy, consulate, or a person buying for personal use and furnishes Form 15G/15H, TCS may not apply in certain cases.

TCS on Overseas Tour Packages — Section 206C(1F)

Any person (tour operator) selling an overseas tour package must collect TCS from the buyer. The rates for AY 2026-27 follow a tiered structure:

• Up to ₹7,00,000: 5% TCS on the package amount.
• Above ₹7,00,000: 20% TCS on the amount exceeding ₹7 lakh.
• “Overseas tour package” means any package that includes travel to a destination outside India, regardless of whether it includes accommodation, sightseeing, or other services.
• The ₹7 lakh threshold is an aggregate limit per buyer per financial year — if the same person buys multiple packages, the amounts are added together.

TCS on LRS Foreign Remittance — Section 206C(1G)

When an authorised dealer (bank) remits money outside India under the Reserve Bank of India’s Liberalised Remittance Scheme (LRS), TCS must be collected from the remitter. The rates depend on the purpose of remittance:

Purpose of Remittance	TCS Rate (up to ₹7L)	TCS Rate (above ₹7L)	Remarks
Education — funded by education loan from financial institution	Nil	0.5%	Lowest rate; loan must be from recognised institution
Education — self-funded (no loan)	Nil	5%	Tuition, hostel, living expenses for foreign education
Medical treatment abroad	Nil	5%	Hospital fees, related travel and accommodation
Overseas tour package (booked through tour operator)	5%	20%	Covered under 206C(1F); LRS TCS is additional if routed via bank
Investment in foreign shares, property, deposits, bonds	Nil	20%	Highest rate; includes foreign portfolio investment
Gifts / family maintenance / general transfers	Nil	20%	All purposes not separately covered

Important: The ₹7,00,000 threshold is an aggregate annual limit per person across all purposes. If a person remits ₹5 lakh for education and ₹3 lakh for investment, TCS on the amount above ₹7 lakh (₹1 lakh) applies at the rate applicable to each purpose. The authorised dealer (bank) tracks the aggregate amount.

TCS on Sale of Goods — Section 206C(1H)

Section 206C(1H) requires sellers with turnover exceeding ₹10 crore in the preceding financial year to collect TCS at 0.1% on sale consideration received from a buyer exceeding ₹50,00,000 in a financial year. Key rules:

• Applies to all goods (not just specified goods under 206C(1)) sold by a high-turnover seller.
• TCS is collected on the amount exceeding ₹50 lakh, not on the entire amount.
• Does not apply to goods already covered under other TCS provisions or if the buyer is liable to deduct TDS under Section 194Q.
• Export transactions, government buyers, and certain exempt categories are excluded.
• The seller must issue a TCS certificate and file quarterly returns in Form 27EQ.

TCS vs TDS Overlap — Priority Rules

When a transaction falls under both TDS provisions and TCS provisions, the Income Tax Act 2025 provides clear priority rules:

• Section 194Q vs 206C(1H): If the buyer is liable to deduct TDS at 0.1% under Section 194Q (purchase of goods above ₹50 lakh, buyer turnover > ₹10 crore), this overrides the seller’s obligation to collect TCS under 206C(1H). TDS by the buyer takes priority.
• Practical impact: When both buyer and seller have turnover above ₹10 crore and the transaction exceeds ₹50 lakh, only TDS under 194Q applies — no double taxation of TDS + TCS.
• Other TCS sections: Section 194Q does not override TCS under 206C(1), 206C(1C), 206C(1F), or 206C(1G). Those TCS provisions operate independently.

Higher TCS for Non-Filers — Section 206CCA

Parallel to Section 206AB for TDS, Section 206CCA mandates higher TCS rates for buyers who have not filed their income tax returns. The conditions are identical:

• The buyer has not filed income tax returns for both of the 2 preceding assessment years for which the due date has passed.
• The aggregate TDS and TCS in each of those 2 years exceeded ₹50,000.
• The applicable TCS rate becomes the higher of: twice the applicable rate or 5%.
• Does not apply to non-resident buyers who do not have a permanent establishment in India.

TCS Credit Mechanism for Buyers

The buyer on whom TCS has been collected receives full credit for the tax amount while filing their income tax return:

• Step 1: Verify TCS collected in your Form 26AS and AIS (Annual Information Statement) on the Income Tax e-filing portal.
• Step 2: Report the TCS amount in the appropriate schedule of your ITR form (Schedule TCS).
• Step 3: The TCS amount is added to your total tax credits (along with TDS, advance tax, and self-assessment tax).
• Step 4: If total credits exceed your tax liability, the excess is refunded.
• TCS does not increase your taxable income — it is purely a tax payment mechanism.

TCS Returns, Certificates & Penalties

Compliance Requirement	Details	Due Date / Consequence
TCS deposit with government	Deposit via Challan 281 at authorised bank or e-pay tax portal	7th of the following month; government collectors — same day
TCS return filing — Form 27EQ	Quarterly return with details of all TCS collected	Q1: 15 Jul | Q2: 15 Oct | Q3: 15 Jan | Q4: 15 May
TCS certificate — Form 27D	Issued to buyer showing TCS collected and deposited	Within 15 days of filing Form 27EQ
Interest for late deposit	Simple interest on TCS amount not deposited on time	1% per month (or part thereof) from collection date to deposit date
Penalty for non-collection	Penalty under Section 271CA	Equal to the amount of TCS not collected
Late filing fee — Form 27EQ	Fee under Section 234E	₹200 per day until filed (capped at TCS amount)
Penalty for incorrect statement	Penalty under Section 271H	₹10,000 to ₹1,00,000

For a full overview of penalties and interest under the Income Tax Act 2025, refer to our dedicated guide.

Changes from Income Tax Act 1961

• ₹7 lakh threshold consolidated: The Budget 2023 increase of the LRS/tour package TCS threshold from nil to ₹7 lakh is now embedded in the 2025 Act as a permanent provision rather than an annual amendment.
• Rate rationalisation: TCS rates on LRS above ₹7 lakh for non-education/non-medical purposes were increased to 20% (from the original 5%) — this change, effective from October 2023 under the 1961 Act, is now part of the main code.
• 206C(1H) codification: The sale-of-goods TCS provision, introduced via Finance Act 2020, is now integrated into the 2025 Act with the same ₹50 lakh threshold and 0.1% rate.
• Priority rule clarity: The TDS-over-TCS priority rule (Section 194Q overrides 206C(1H)) is now explicitly stated in the Act rather than relying on CBDT circulars.
• Section re-numbering: While the substantive provisions are largely unchanged, section numbers and cross-references have been updated to align with the 2025 Act’s structure.

For TCS compliance, return filing, or advisory services, contact Virtual Auditor. See also our complete TDS rate chart and ITR filing services.