Key Highlights
- TCS collected by seller from buyer — unlike TDS which is deducted by payer
- TCS on Foreign Remittances (LRS): 20% on remittances above Rs 7 lakh (Budget 2023)
- TCS on overseas tour packages: 5% (20% if remittance above Rs 7 lakh threshold)
- TCS on sale of motor vehicles above Rs 10 lakh: 1%
- TCS on sale of goods above Rs 50 lakh (not covered elsewhere): 0.1%
- TCS credited in buyer Form 26AS — can be claimed as tax credit in ITR
Legal Reference
Sections 402-408, Income Tax Act, 2025 — TCS provisions | Corresponds to Section 206C of ITA 1961 | LRS = Liberalised Remittance Scheme (RBI)
1. TCS on Foreign Remittances Under LRS (Liberalised Remittance Scheme)
| Purpose of Remittance | TCS Rate | Threshold |
|---|
| Foreign tour packages purchased from tour operator | 5% (up to Rs 7L); 20% above Rs 7L | No lower threshold |
| All other LRS remittances (investment abroad, gifts, overseas studies etc.) | 20% on amount above Rs 7 lakh | Rs 7 lakh per year |
| Education abroad (loan from FI) | 0.5% (concessional rate if financed by specified institution) | Above Rs 7 lakh |
| Medical treatment abroad (from own funds) | 5% above Rs 7 lakh | Rs 7 lakh |
2. TCS on Sale of Motor Vehicles
Sellers of motor vehicles priced above Rs 10 lakh must collect TCS at 1% from the buyer at the time of sale. This applies to cars, SUVs, two-wheelers above Rs 10 lakh. The TCS is collected over and above the sale price — the buyer pays Rs 10 lakh + 1% TCS to the seller. This TCS appears in the buyer Form 26AS and can be claimed as credit.
3. TCS on Sale of Goods (Section 403)
Sellers with turnover above Rs 10 crore must collect TCS at 0.1% from buyers if the total sales to a single buyer exceed Rs 50 lakh in a Tax Year. This TCS was introduced to widen the tax base and capture B2B transactions.
4. TCS on Alcohol, Forest Produce, Minerals
Traditional TCS items collected by specified sellers:
| Item | TCS Rate |
|---|
| Tendu leaves | 5% |
| Timber from government forest | 2.5% |
| Other forest produce | 2.5% |
| Scrap | 1% |
| Minerals (coal, lignite, iron ore) | 1% |
| Liquor for human consumption (if sold by government) | 1% |
5. Claiming TCS as Credit in ITR
TCS collected from the buyer is deposited by the seller with the government and appears in the buyer Form 26AS. The buyer can claim this TCS as a tax credit when filing ITR — reducing their total tax payable. TCS is essentially an advance tax collected from the buyer by the seller on behalf of the government.
6. Why TaxClue
TCS compliance — collection, deposit, and quarterly returns (Form 27EQ) — requires precise tracking by sellers. Buyers need to ensure TCS credits appear in Form 26AS before filing ITR. TaxClue assists with TCS compliance and advisory. Contact us for TCS return filing and advisory under ITA 2025.
Disclaimer
This article is for general informational and educational purposes only. It does not constitute legal, financial, or professional tax advice. Readers are advised to consult a qualified Chartered Accountant or tax professional before making any decisions. TaxClue Consultech Pvt Ltd accepts no liability. All case studies and examples in this article are illustrative only and do not represent actual persons or transactions.
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❓ Frequently Asked Questions
What is TCS on foreign remittance?
Under the Liberalised Remittance Scheme (LRS), the bank or authorised dealer collecting foreign exchange must collect TCS from the remitter. From October 2023, TCS is at 20% on amounts above Rs 7 lakh per year for most purposes — investments abroad, gifts, maintenance of relatives abroad. Tour packages have a concessional 5% TCS (up to Rs 7L total remittance) or 20% above Rs 7L. Education loans from specified institutions attract only 0.5% TCS above Rs 7L.
Can I claim TCS as a tax credit?
Yes. TCS collected by sellers is deposited with the government and appears in the buyer/remitter Form 26AS. The buyer or remitter can claim this TCS as a credit against their total income tax liability when filing ITR — reducing tax payable or increasing a refund. If TCS exceeds total tax liability, the excess is refunded along with the ITR refund. Ensure TCS is correctly reflected in Form 26AS before filing.
What is TCS on sale of goods?
Under Section 403 of ITA 2025, any seller with turnover above Rs 10 crore in the preceding year must collect TCS at 0.1% from buyers when the aggregate sales to a single buyer exceed Rs 50 lakh in a Tax Year. This TCS is separate from TDS on payments to professionals or contractors. The buyer provides their PAN; if PAN is not provided, TCS is collected at 1% (higher rate for non-PAN).
What is the TCS rate on overseas tour packages?
Under ITA 2025, tour operators must collect TCS on overseas tour packages sold to individuals. The rate is 5% on the total package cost up to the point where the individual remittance reaches Rs 7 lakh in the Tax Year. For amounts above Rs 7 lakh cumulative LRS remittance (including tour packages), the rate is 20%. This TCS applies at the point of purchase of the tour package and is credited in the buyer Form 26AS.
What are TCS compliance requirements for sellers?
Sellers required to collect TCS must: collect TCS from the buyer at the time of sale; deposit TCS with the government by the 7th of the following month (30 April for March); file quarterly TCS returns in Form 27EQ (within 15 days from quarter end); and issue TCS certificates (Form 27D) to buyers within 15 days of filing the quarterly return. Late deposit attracts interest at 1% per month and late return filing attracts Rs 200 per day penalty.
