TCS (Tax Collected at Source) under Section 206C is collected by the seller from the buyer at the time of sale of specified goods or on foreign remittances. It is not an extra cost — it is advance tax the buyer can fully claim as credit (and get refunded) when filing the income-tax return. Key rates: motor vehicle above Rs 10 lakh 1%; general LRS foreign remittance 20% above Rs 10 lakh; foreign tour package 5% up to Rs 10 lakh then 20%; e-commerce operator payout to sellers 1% (u/s 194-O).
TCS is only a mode of collecting tax in advance. Every rupee of TCS collected from you appears in your Form 26AS and AIS, and is adjusted against your total tax liability in the ITR. If it exceeds your tax due, the balance is refunded. It is different from GST or a service charge.
TCS Rate Chart — FY 2025-26 (AY 2026-27)
The main TCS transactions, the governing sub-section, the rate on a buyer who has furnished PAN, and the threshold. Rates without PAN are generally higher (twice the rate or 5%, whichever is more).
| Transaction | Section | TCS Rate | Threshold |
|---|---|---|---|
| Motor vehicle (car / SUV) | 206C(1F) | 1% | Sale value > Rs 10 lakh |
| Alcoholic liquor for human consumption | 206C(1) | 1% | No threshold |
| Timber / other forest produce | 206C(1) | 2% – 2.5% | No threshold |
| Tendu leaves | 206C(1) | 5% | No threshold |
| Scrap | 206C(1) | 1% | No threshold |
| Minerals — coal, lignite, iron ore | 206C(1) | 1% | No threshold |
| Parking lot / toll / mining & quarrying lease | 206C(1C) | 2% | No threshold |
| LRS — foreign remittance (general) | 206C(1G) | 20% | Above Rs 10 lakh / FY |
| LRS — education (self-funded) or medical | 206C(1G) | 5% | Above Rs 10 lakh / FY |
| LRS — education funded by loan | 206C(1G) | Nil | Exempt from 1 Apr 2025 |
| Overseas tour programme package | 206C(1G) | 5% / 20% | 5% up to Rs 10L, 20% beyond |
| E-commerce — payout to sellers (194-O) | 194-O | 0.1% | Gross sales > Rs 5 lakh |
Budget 2025: LRS threshold raised from Rs 7L to Rs 10L and TCS on education loan remittance removed, both w.e.f. 1 Apr 2025. The Section 206C(1H) 0.1% TCS on sale of goods (buyer > Rs 50L) was omitted from 1 Apr 2025 as TDS u/s 194Q now covers it. Verify current-year rates at incometax.gov.in before a large transaction.
TCS on Car Purchase Above Rs 10 Lakh
Under Section 206C(1F), a motor-vehicle dealer must collect 1% TCS from the buyer when the sale consideration of a single vehicle exceeds Rs 10 lakh. It applies to cars, SUVs and other motor vehicles. TCS is charged on the full invoice value, not just the amount above Rs 10 lakh.
Car priced Rs 15,00,000
Car priced Rs 9,50,000
The Rs 15,000 TCS on a Rs 15 lakh car is not lost. It shows in your Form 26AS under Form 27D, and you claim it as a credit in your ITR against your total tax. If your tax is already covered by TDS/advance tax, the TCS is refunded. Keep the dealer's TCS certificate (Form 27D).
Bought a car or made a big remittance? Make sure the TCS is claimed in your ITR.
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TCS on LRS Foreign Remittance — FY 2025-26
The Liberalised Remittance Scheme (LRS) lets a resident individual remit up to USD 2,50,000 per financial year abroad. From 1 April 2025, TCS applies only on aggregate LRS remittances above Rs 10 lakh per financial year (raised from Rs 7 lakh in Budget 2025), except tour packages which are taxed from the first rupee.
| Purpose of remittance | TCS rate | Threshold | Note |
|---|---|---|---|
| Education — funded by an education loan | Nil | — | TCS removed w.e.f. 1 Apr 2025 |
| Education (self-funded) / medical treatment | 5% | Above Rs 10L / FY | Only on the amount above Rs 10 lakh |
| Overseas tour programme package | 5% / 20% | From Re 1 | 5% up to Rs 10L, 20% on the excess |
| Investments, gifts, maintenance, other LRS | 20% | Above Rs 10L / FY | Residual category at the highest rate |
The Rs 10 lakh threshold is aggregate across all LRS purposes in the year. TCS on LRS is fully creditable and refundable through your ITR.
A Rs 20 lakh overseas investment can attract roughly Rs 2 lakh TCS (20% on the amount above Rs 10 lakh). This is a cash-flow hit, not a permanent tax — the full amount is adjusted or refunded in your ITR. Plan large remittances and salaried-buyer TDS together so you are not over-collected.
How to Claim TCS Credit in Your ITR
- 1Seller collects TCSOn car, LRS, scrap etc.
- 2Get Form 27DTCS certificate from collector
- 3Check 26AS / AISConfirm TCS is reflected
- 4Enter in ITRTDS/TCS credit schedule
- 5Set off / refundExcess refunded to your bank
TCS credit is claimed exactly like TDS credit. Reconcile the TCS in your Form 26AS and AIS before filing — if a collector has not deposited what they collected, it will not appear and you cannot claim it.
TDS vs TCS — Key Difference
| Feature | TDS | TCS |
|---|---|---|
| Who acts | Payer (buyer / employer) | Seller / collector |
| When | At payment or credit | At receipt from buyer |
| Governing section | 192 – 194S | 206C |
| Certificate | Form 16 / 16A | Form 27D |
| Reflected in | 26AS / AIS | 26AS / AIS |
| Refundable if excess | Yes | Yes |
Some buyers mix up TCS with the old Service Tax. Service Tax was abolished and subsumed into GST from 1 July 2017 and no longer exists. TCS is an income-tax provision (Sec 206C); GST is the indirect tax that replaced service tax. See our GST guide if you were looking for indirect tax on services.
Want us to reconcile 26AS/AIS and claim every rupee of TCS & TDS?
Get ITR Filing Help →- Section 206C & TCS rates: incometax.gov.in
- CBDT circulars & Finance Act 2025 (LRS threshold Rs 10L, education-loan TCS nil)
- Section 206C(1H) omitted w.e.f. 1 Apr 2025 (Finance Act 2025)
- Form 27D (TCS certificate); Form 26AS / AIS on the e-filing portal
Disclaimer: This guide is general information based on the law and notifications in force when it was last updated. It is not professional advice for your case — rates, thresholds and due dates change, so check the current position with the official source before you act on it.