Section 394 of the Income-tax Act, 2025 carries the tax collected at source table: 1% on alcoholic liquor, scrap and minerals, 5% on tendu leaves, 2% on timber and parking or toll leases, and specified rates on LRS remittances and overseas tour packages.
TCS rates are not in Schedule X. Schedule X is read with section 49 and carries the Site Restoration Fund deduction. TCS rates are in the table inside section 394.
Where TCS lives now
Tax collected at source moves from section 206C of the Income-tax Act, 1961 into section 394 of the Income-tax Act, 2025, with the rates in a four-column table: nature of receipt, person who collects, and rate of tax collected at source.
The familiar goods are all there — alcoholic liquor, tendu leaves, timber, scrap and minerals — alongside the newer categories: Liberalised Remittance Scheme remittances, overseas tour programme packages, and the sale consideration exceeding ten lakh rupees entry.
The related machinery sits around it: section 395(3) for a lower collection certificate, section 397 for compliance and higher rates for non-filers and non-PAN cases, section 398 for consequences of failure, and section 399 for processing.
The Income-tax Act, 2025 takes effect from 1 April 2026 and applies from tax year 2026-27. The Income-tax Act, 1961 continues to govern every year up to 31 March 2026 because of the repeal and savings provision in section 536. The Schedule contents described here are taken from the Act as enacted, incorporating the corrigenda notified in the Gazette on 3 September 2025.
Where each provision actually sits
| Topic | Income-tax Act, 1961 | Income-tax Act, 2025 |
|---|---|---|
| Tax collected at source | Section 206C | Section 394 |
| Lower collection certificate | Section 206C(9) | Section 395(3) |
| Higher rate for non-PAN collectees | Section 206CC | Section 397 |
| Higher rate for non-filers | Section 206CCA | Section 397 |
| Consequences of failure to collect | Sections 206C(6A) and (7) | Section 398 |
| Processing of TCS statements | Section 206CB | Section 399 |
| Penalty for failure to collect | Section 271CA | Section 449 |
| Prosecution for failure to pay TCS | Section 276BB | Section 477 |
The section 394 table
How to read it
Column B is the nature of receipt, column C the person who must collect — usually the seller, but an authorised dealer for LRS remittances and a licensor or lessor for parking, toll and mine leases — and column D the rate.
Goods — serials 1 to 6
Alcoholic liquor for human consumption — 1%. Tendu leaves — 5%, the highest of the goods rates. Timber, whether obtained under a forest lease or otherwise — 2%. Scrap — 1%. Minerals being coal, lignite or iron ore — 1%. And sale consideration exceeding ten lakh rupees — 1% for the specified goods.
Serial 7 — Liberalised Remittance Scheme
Remittances under the Liberalised Remittance Scheme, collected by the authorised dealer, at 5% for purposes of education or medical treatment and 20% for purposes other than education or medical treatment. Read the entry in full for the thresholds and the education-loan carve-out.
Serial 8 — overseas tour programme packages
Sale of an overseas tour programme package by the seller, at 5% of the amount or aggregate up to a specified limit and a higher rate above it. The tiering is set out in column D of the entry.
Serial 9 — leases and licences
Use of a parking lot, toll plaza, mine or quarry — collected by the licensor or lessor at 2%.
What Schedule X actually contains
Schedule X is read with section 49 and gives the Site Restoration Fund deduction for a business prospecting for, or extraction or production of, mineral oils. The quantum is the amount deposited or 20% of the profits of that business computed before the deduction, whichever is less, allowed before set off of brought-forward losses under section 112. Paragraph 1(3) treats interest credited in the specified account as a deposit.
The section 394 TCS table, as enacted
Reproduced from the Act. Long entries are abridged — read the bare section for the full text of column D.
| Sl. No. | Nature of receipt | Person | Rate of TCS |
|---|---|---|---|
| Sl. No. | Nature of receipt | Person | Rate of Tax Collected at Source |
| 1. | Sale of alcoholic liquor for human consumption. | Seller. | 1% |
| 2. | Sale of tendu leaves. | Seller. | 5% |
| 3. | Sale of timber whether obtained under a forest lease or otherwise; or any other forest produce (not being timber or tendu leaves) obtained under a forest lease. | Seller. | 2% |
| 4. | Sale of scrap. | Seller. | 1% |
| 5. | Sale of minerals, being coal or lignite or iron ore. | Seller. | 1% |
| 6. | Sale consideration exceeding ten lakh rupees in case of— (a) motor vehicle; or (b) any other goods, as may be notified by the Central Government. | Seller. | 1% |
| 7. Sl. No. | Remittance under the Liberalised Remittance Scheme of an amount or aggregate of the amounts exceeding ten lakh rupees— Nature of receipt | Authorised dealer. Person | (a) 5% for purposes of education or medical Rate of Tax Collected at Source treatment; (b) 20% for purposes other than education or medical treatment. |
| 8. | Sale of “overseas tour programme package” including expenses for travel or hotel stay or boarding or lodging or any such similar or related expenditure. | Seller. | (a) 5% of amount or aggregate of amounts up to ten lakh rupees; (b) 20% of amount or aggregate of amounts exceeding ten lakh rupees. |
| 9. | Use of parking lot or toll plaza or mine or quarry for the purpose of business, excluding mining and quarrying of mineral oil (including petroleum and natural gas). | Licensor or Lessor. | 2% |
Worked example
A trading company's collections in tax year 2026-27.
| Transaction | Who collects | Rate |
|---|---|---|
| Sale of scrap to a manufacturer | Seller | 1% |
| Sale of tendu leaves | Seller | 5% |
| Sale of timber under a forest lease | Seller | 2% |
| Customer's LRS remittance for a child's university fees abroad | Authorised dealer | 5% — education purpose |
| Customer's LRS remittance to buy overseas property | Authorised dealer | 20% — other than education or medical |
| Grant of a toll plaza licence | Licensor | 2% |
Note who collects. For LRS the obligation is on the authorised dealer, not on the remitter or the overseas recipient; and for leases it is on the licensor or lessor.
Compliance checklist
- Identify the correct collector from column C — seller, authorised dealer, or licensor or lessor.
- For LRS remittances, distinguish education or medical purposes from all others; the rates differ sharply.
- Apply the tiering in the overseas tour programme package entry.
- Check section 397 for higher rates where the collectee has no PAN or is a non-filer.
- A buyer may apply for a lower collection certificate under section 395(3); there is no nil certificate for TCS.
- Deposit collected tax on time — failure attracts section 398 interest, section 449 penalty and section 477 prosecution.
- For the Site Restoration Fund, read Schedule X with section 49.
Common mistakes
- Looking for TCS rates in Schedule X.
- Applying the 5% LRS rate to a remittance that is not for education or medical treatment.
- Assuming the remitter collects LRS tax; the authorised dealer does.
- Seeking a nil collection certificate; section 395(3) provides only for a lower rate.
- Confusing section 394 (TCS) with section 393 (TDS).
All sixteen Schedules of the Income-tax Act, 2025
Because the numbering is widely misquoted, the full list is reproduced below from the Act as enacted. Note that Schedules II to VII are all exemption lists, split by who is claiming rather than by what the income is.
| Schedule | Read with | Subject as enacted |
|---|---|---|
| I | section 9(12) | Conditions for certain activities not to constitute business connection in India |
| II | section 11 | Income not to be included in total income |
| III | section 11 | Income not to be included in total income of eligible persons |
| IV | section 11 | Income not to be included in total income of eligible non-residents, foreign companies and other such persons |
| V | section 11 | Income not to be included in total income of certain eligible persons including investment funds, business trusts and their unit holders |
| VI | section 11 | Income not to be included in total income of certain eligible persons in an International Financial Services Centre or having income therefrom |
| VII | section 11 | Persons exempt from tax |
| VIII | section 12 | Income not to be included in the total income of political parties and electoral trusts |
| IX | section 48 | Deduction for tea, coffee and rubber development accounts |
| X | section 49 | Deduction for Site Restoration Fund |
| XI | section 2(91) | Recognised provident funds, approved superannuation funds and approved gratuity funds |
| XII | section 51 | Minerals, and groups of associated minerals |
| XIII | section 45(2) | List of articles or things |
| XIV | section 55 | Insurance business |
| XV | section 123 | Deduction for life insurance premia, contribution to provident fund, subscription to certain equity shares, etc. |
| XVI | section 350 | Permitted modes of investment or deposits by a registered non-profit organisation |
This is an explanatory guide, not tax advice, and it does not reproduce the section in full. Read the bare text of the section before you rely on it, and check for later amendments, the Income-tax Rules made under the new Act, and CBDT circulars and notifications.