Section 206C — Tax Collected at Source (TCS) Rate Chart & Guide 2026

Updated: 3 June 2026

Section 206C of the Income Tax Act mandates Tax Collected at Source (TCS) — where the seller collects tax from the buyer and deposits it with the government. Key rates (FY 2025-26): motor vehicle above ₹10L → 1%; LRS overseas remittance (general) above ₹7L → 20%; foreign tour packages → 5%; alcohol/tobacco, minerals, scrap → 1%; timber (forest lease) → 2.5%; parking lots, toll plazas → 2%. TCS is a credit against income tax — fully claimable in ITR via Form 26AS.

20% TCS on LRS foreign remittance above ₹7 lakh for general purposes (investments, gifts) — introduced Budget 2023, effective Oct 2023.

Section 206C — Complete Rate Chart by Sub-Section (FY 2025-26)

Sub-Section	Transaction Type	TCS Rate	Threshold
206C(1)	Alcoholic liquor for human consumption	1%	No threshold
206C(1)	Tendu leaves	5%	No threshold
206C(1)	Timber (obtained under forest lease)	2.5%	No threshold
206C(1)	Timber (any other mode)	2%	No threshold
206C(1)	Forest produce other than timber / tendu leaves	2%	No threshold
206C(1)	Scrap	1%	No threshold
206C(1)	Minerals (coal, lignite, iron ore)	1%	No threshold
206C(1C)	Parking lots, toll plazas, mining & quarrying	2%	No threshold
206C(1F)	Motor vehicle (car, SUV) sale	1%	Sale value > ₹10 lakh
206C(1G)	Overseas remittance — LRS (general: investments, gifts, etc.)	20%	Above ₹7 lakh/FY
206C(1G)	Overseas remittance — LRS (education self-funded, medical)	5%	Above ₹7 lakh/FY
206C(1G)	Overseas remittance — education via approved loan	0.5%	Above ₹7 lakh/FY
206C(1G)	Foreign tour package	5%	No threshold (full amount)
206C(1H)	Sale of goods (non-specific categories)	0.1%	Buyer's purchases > ₹50L/FY from seller

TCS vs TDS — Key Differences

Feature	TDS (Tax Deducted at Source)	TCS (Tax Collected at Source)
Who acts	Payer/buyer deducts	Seller/collector collects
When triggered	At time of payment or credit	At time of receipt from buyer
Governing sections	Section 192 to 194S	Section 206C
TDS/TCS return	Form 24Q (salary), 26Q (non-salary), 27Q (NR)	Form 27EQ
Certificate issued	Form 16 / Form 16A	Form 27D
Reflected in	Form 26AS / AIS (TDS section)	Form 26AS / AIS (TCS section)
Credit claimable in ITR	Yes	Yes
Refundable if excess	Yes	Yes

TCS on LRS (Overseas Remittance) — FY 2025-26 Detail

The LRS TCS regime was significantly tightened in Budget 2023. The 20% rate on general LRS remittances applies from 1 October 2023. The ₹7 lakh threshold is the aggregate LRS remittance limit per financial year across all purposes.

Purpose	TCS Rate	Threshold	Effective From
Education (loan from specified institution)	0.5%	Above ₹7L/FY	1 Oct 2023
Education (self-funded) / Medical treatment	5%	Above ₹7L/FY	1 Oct 2023
Foreign tour package	5%	Nil (full amount)	1 Oct 2023
Overseas investments (stocks, property, etc.)	20%	Above ₹7L/FY	1 Oct 2023
Gifts to persons abroad	20%	Above ₹7L/FY	1 Oct 2023
Maintenance of close relatives abroad	20%	Above ₹7L/FY	1 Oct 2023
Any other LRS purpose	20%	Above ₹7L/FY	1 Oct 2023

Frequently Asked Questions

How do I get a refund of TCS collected on LRS foreign remittance?

TCS collected on LRS (Liberalized Remittance Scheme) remittances is not a final tax — it is advance tax credit. To claim a refund: (1) File your Income Tax Return (ITR) for the financial year in which TCS was collected; (2) The TCS amount will appear in Form 26AS and AIS under the TCS section; (3) In your ITR, this TCS credit is automatically applied against your total tax liability; (4) If TCS collected exceeds your total tax payable (after advance tax, TDS, etc.), the balance is refunded by the IT department. For individuals with no other income or low income, the full TCS on LRS may be refunded. Ensure your pre-validated bank account is linked to your PAN on the IT portal for direct credit of refund.

Is TCS on car purchase above ₹10 lakh compulsory for all buyers?

Yes, Section 206C(1F) mandates that every authorised motor vehicle dealer must collect TCS at 1% from any buyer whose purchase consideration exceeds ₹10 lakh. This applies regardless of whether the buyer is an individual, company, or firm. There is no exemption for buyers who are themselves registered for TDS/TCS or who submit Form 27C (the declaration form for buyers who purchase goods for manufacturing — this exemption does not apply to 206C(1F) motor vehicles). The TCS collected is shown as credit in Form 26AS and the buyer claims it while filing ITR. The dealer must deposit TCS by the 7th of the following month and file Form 27EQ quarterly.

How to get TCS certificate (Form 27D) from the seller?

Form 27D is the TCS certificate that the collector (seller) must issue to the buyer, similar to how Form 16A is issued for TDS. The seller issues Form 27D within 15 days of the due date for filing TCS return (Form 27EQ). For quarterly filing, that means within 15 days after the end of each quarter. The certificate contains: name and TAN of the collector, name and PAN of the buyer/payee, nature and amount of goods/service, TCS amount collected, period, and challan details. If your seller has not provided Form 27D, you can check Form 26AS directly on the IT portal — TCS credits appear there irrespective of whether the physical certificate has been issued.

Does Section 206C apply to NRI buyers or sellers?

Yes, Section 206C applies to transactions in India involving NRIs. If an NRI buys a motor vehicle in India above ₹10 lakh, the dealer must collect 1% TCS. For LRS remittances, Section 206C(1G) TCS is collected by the Authorised Dealer (bank) — NRIs are generally not eligible to remit under LRS (it is an RBI facility for resident Indians), so LRS TCS typically applies to resident Indians only. For TCS on sale of goods under 206C(1H), if an NRI buyer purchases goods from an Indian seller exceeding ₹50 lakh in a financial year, TCS at 0.1% applies. NRI buyers can claim TCS credit in their Indian ITR or seek refund if Indian tax liability is nil.

What is the difference between Section 206C(1H) and Section 194Q?

Both sections cover TCS/TDS on purchase and sale of goods above ₹50 lakh, but they work differently: Section 206C(1H) requires the SELLER to collect 0.1% TCS from the buyer when the buyer's cumulative purchases in a year exceed ₹50 lakh. Section 194Q requires the BUYER to deduct 0.1% TDS on purchase consideration exceeding ₹50 lakh per year from a single seller, if the buyer's turnover exceeds ₹10 crore in the preceding year. The key rule: if the buyer is liable to deduct TDS under 194Q, then the seller is NOT required to collect TCS under 206C(1H) for the same transaction. 194Q takes precedence. If the buyer is not covered by 194Q (e.g., turnover below ₹10 crore), then 206C(1H) applies.

Section 206c Near You

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