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Major Tax Relief: TCS on Sale of Goods Under Section 206(1H) Exempted Starting April 2025!
Breaking News: Section 206(1H) TCS on Sale of Goods Scrapped from April 1, 2025

In a significant update for businesses and taxpayers, the Central Board of Direct Taxes (CBDT) has announced that Tax Collected at Source (TCS) under Section 206(1H) on the sale of goods will no longer apply starting April 1, 2025. This move aims to simplify compliance burdens and streamline India’s tax framework, marking a pivotal shift in how transactions involving goods will be taxed.Also Read-Key Highlights of Circular No. 245/02/2025-GST: Clarifications and Exemptions
A seller with ₹15 crore turnover previously collected ₹60,000 TCS on a ₹60 lakh transaction. From April 2025, no TCS is required. Buyers will continue deducting 0.1% TDS under Section 194Q.
Understanding the Shift: Why Section 206(1H) Is Being Withdrawn.
Introduced in 2020, Section 206(1H) mandated sellers to collect 0.1% TCS on the sale of goods exceeding ₹50 lakhs in a financial year. While intended to enhance tax transparency, the provision faced criticism for complicating cash flow management, especially for SMEs and e-commerce platforms. The government’s decision to revoke this clause reflects feedback from stakeholders and aligns with its broader agenda of fostering ease of doing business.Key Features of Section 206C(1H) (Till March 31, 2025):
- Applied to sellers with ₹10+ crore turnover in the previous year.
- TCS triggered on receipts over ₹50 lakh from a buyer.
- Exemptions for government entities, embassies, and specific goods.
Aspect | Before April 1, 2025 | After April 1, 2025 |
Applicability | TCS on goods sales above ₹50L | No TCS under Section 206(1H) |
Rate | 0.1% | 0% (Exempted) |
Compliance Burden | Monthly returns and reporting | Reduced paperwork |
Impact on Sellers | Cash flow constraints | Improved liquidity |
Why Was Section 206C(1H) Removed?
The removal stems from overlapping tax compliance between TCS (seller’s duty) and TDS under Section 194Q (buyer’s duty). Both provisions applied a 0.1% tax on the same transaction, leading to confusion and redundant compliance efforts.Key Issues Addressed:
- Double Taxation: Sellers struggled to verify if buyers had already deducted TDS under Section 194Q.
- Compliance Burden: Tracking TDS/TCS applicability increased operational costs.
- Liquidity Blockage: Businesses faced cash flow issues due to dual tax deductions.
Post-April 2025: What Changes?
Aspect | Before April 2025 | After April 2025 |
---|---|---|
Applicability | Sellers > ₹10 crore turnover | Section 206C(1H) abolished |
Tax Rate | 0.1% TCS on receipts > ₹50 lakh | No TCS on sale of goods |
Compliance Check | Verify TDS deduction by buyer | Only TDS under Section 194Q applies |
Exemptions | Exports, government buyers, specific goods | N/A |
Example:
Impact on Businesses.
- Reduced Compliance: Sellers no longer need to track TDS status of buyers.
- Lower Costs: Savings on administrative efforts and penalties for non-compliance.
- Improved Liquidity: Funds previously locked in TCS are now available for operations.
What Businesses Need to Do Now.
- Update Accounting Systems: Remove TCS modules linked to Section 206(1H).
- Re-educate Teams: Train finance departments on the revised tax framework.
- Monitor Transition: Stay alert for circulars clarifying transitional returns for FY 2024-25.