Do we still collect 0.1% TCS on sales above ₹50 lakh?

Your company sells goods. For a few years your billing team added 0.1% tax collected at source (TCS) once a buyer crossed ₹50 lakh in a year. Now someone asks: do we still do this? The short answer is no. The seller's duty to collect this TCS has stopped. But the buyer's side of the same idea, a 0.1% TDS on purchases, is still alive. Mixing the two up is the common error.

This article sets out what stopped, from when, what continues, and what to check in your books.

The short answer

The seller's TCS on sale of goods above ₹50 lakh sat in section 206C(1H) of the Income-tax Act, 1961. The Finance Act 2025 inserted a proviso into that sub-section: "nothing contained in the provisions of this sub-section shall apply from the 1st day of April, 2025" (section 72(c), Finance Act 2025).
The Finance Act 2025 sections 2 to 91 came into force on 1 April 2025 (section 1(2)(a), Finance Act 2025). So for receipts on or after 1 April 2025 you do not collect this TCS.
The buyer-side TDS on purchases of goods is a different provision, section 194Q of the 1961 Act. The Finance Act 2025 only trimmed a cross-reference in it (section 69). Under the Income-tax Act, 2025 the counterpart is section 393(1), Table, Sl. No. 8(ii), at 0.1% on the sum above ₹50 lakh.

What section 206C(1H) used to say

As inserted by the Finance Act 2020, a seller who received consideration for sale of goods worth more than ₹50 lakh in a previous year had to collect from the buyer 0.1% of the amount above ₹50 lakh, at the time of receipt (section 206C(1H), Income-tax Act 1961, as inserted by the Finance Act 2020).

Some points of the old rule matter for old transactions:

It applied to a "seller": a person whose total sales, gross receipts or turnover from business exceeded ₹10 crore in the financial year before the year of sale.
It did not apply to goods exported out of India, or to goods already covered by other TCS entries in the same section.
If the buyer was liable to deduct tax at source on the same goods under another provision and had actually deducted it, the seller did not collect.
If the buyer gave no PAN or Aadhaar, a proviso allowed the higher rate under section 206CC to be read as 1% (instead of 5%).

These are the rules for receipts up to 31 March 2025. The proviso added by the Finance Act 2025 switches them off from 1 April 2025.

What else the Finance Act 2025 changed around it

The Finance Act 2025 did not only add the switch-off proviso. It also tidied the neighbouring provisions so that they no longer refer to sub-section (1H):

In section 194Q(5)(b), the words "other than a transaction to which sub-section (1H) of section 206C applies" were omitted (section 69, Finance Act 2025).
In section 206C(9), the reference to "sub-section (1C) or sub-section (1H)" became "or sub-section (1C)" (section 72(e), Finance Act 2025).
In section 206C(10A), "(1C), (1F) or (1H)" became "(1C) or (1F)" (section 72(f), Finance Act 2025).

So the legislature did not merely suspend the TCS for goods sales; it removed the cross-references. Treat it as a closed rule for new sales.

What did not change: the buyer's 0.1% TDS

Section 194Q of the 1961 Act is the buyer-side deduction on purchases of goods. Under the Income-tax Act, 2025 the counterpart sits in section 393(1), Table, Sl. No. 8(ii):

Sum covered: any sum exceeding ₹50 lakh for purchase of any goods.
Who deducts: any person being a buyer. For this entry, "buyer" means a person whose total sales, gross receipts or turnover from business exceeded ₹10 crore in the tax year before the year of purchase, other than persons the Central Government notifies (section 402(6), Income-tax Act 2025).
Rate: 0.1%.
Tax is deducted on the sum exceeding ₹50 lakh (Note 1(b), section 393(1) Table, Income-tax Act 2025).
It does not apply to a transaction on which tax is deductible or collectible under any other provision of the Act (Note 1(a)).

The official section-by-section mapping between the two Acts links section 194Q of the 1961 Act with section 393 of the 2025 Act, and section 206C with section 394.

Do not read this article as the full text of section 194Q of the 1961 Act. The words of that section, apart from the 2025 amendment above, are not reproduced here. Check the full text and the conditions on the department's website before you apply it to your own purchases.

Why 194Q matters to the seller's invoice

Before April 2025 the two provisions were drafted not to apply together to the same transaction: the second proviso to section 206C(1H) and the words in section 194Q(5)(b) that the Finance Act 2025 omitted. With 206C(1H) switched off, the seller has no TCS step on the goods. Whether the buyer deducts TDS under section 194Q is the buyer's duty, based on the buyer's own turnover and purchases from you.

For a seller this means:

Do not add a 0.1% TCS line to invoices for goods dated on or after 1 April 2025.
Expect some buyers to deduct 0.1% from your payment and issue a TDS certificate. Match it to your Form 26AS or annual tax statement and claim it as credit.
Keep a note of which buyers deduct, so you know when a payment arrives short by that 0.1%.

The Income-tax Act, 2025: is there a TCS entry for general goods?

For tax year 2026-27 onwards the Income-tax Act, 2025 applies. Its TCS table is in section 394(1). The table lists nine entries:

Sale of alcoholic liquor for human consumption.
Sale of tendu leaves.
Sale of timber or other forest produce.
Sale of scrap.
Sale of minerals, being coal, lignite or iron ore.
Sale consideration exceeding ₹10 lakh for a motor vehicle, or other goods the Central Government notifies.
Remittances under the Liberalised Remittance Scheme above ₹10 lakh.
Sale of an overseas tour programme package.
Use of a parking lot, toll plaza, mine or quarry for business.

There is no entry for general sale of goods above ₹50 lakh. That matches the 1961 Act, where the 206C(1H) rule stopped on 1 April 2025. The table does not carry it forward.

The Finance Act 2026 amended section 394 of the 2025 Act, changing the rate against some entries (section 85, Finance Act 2026). It also amended section 393 (section 84, Finance Act 2026). Sections 2 to 129 of that Act came into force on 1 April 2026 (section 1(2)(a), Finance Act 2026). The changes to section 393 that I read cover Note 3 of serial number 3, the banking co-operative wording, motor accident compensation, and declaration filing. None of them touches serial number 8(ii). Check the current rates on the department's site before you collect under any entry in the section 394 table.

What to do now: a short checklist

Billing system. Confirm the 0.1% TCS on goods is switched off for sales on or after 1 April 2025. If it is still on, you have been collecting a tax the law does not ask for.
Amounts already collected. If you collected 0.1% on or after 1 April 2025, the collection was not required. Check how you showed it in your TCS returns and whether you should refund buyers. Take advice on the correct way to correct returns.
Receipts up to 31 March 2025. The old rule still governs these. Returns and payments for that period remain your responsibility.
Buyer deductions. Reconcile TDS under section 194Q credited to you against your sales. Claim the credit when you file your return.
Your own purchases. If your company bought goods above ₹50 lakh from one seller and your turnover in the previous year exceeded ₹10 crore, test whether section 194Q of the 1961 Act (section 393 of the 2025 Act) applies to you.

What not to do

Do not stop watching other TCS entries. Scrap, timber, tendu leaves, liquor, minerals and motor vehicles above ₹10 lakh are still in the table (section 394(1), Income-tax Act 2025).
Do not assume a buyer's TDS means you owe TCS too. The seller's TCS on goods has stopped; the buyer's TDS is a separate duty of the buyer.
Do not use this article to decide old-year liability. Use the law as it stood on the date of receipt.

What to do now (with citations)

Next step: switch off the 0.1% TCS for sales on or after 1 April 2025, citing the proviso inserted in section 206C(1H) by section 72(c) of the Finance Act 2025.
Deadline: the switch-off took effect from 1 April 2025, per section 1(2)(a) of the Finance Act 2025.
Consequence of ignoring it: you would be collecting tax the sub-section no longer asks for. The buyer's own section 194Q duty continues under the 1961 Act, and section 393 of the 2025 Act, Sl. No. 8(ii).

Have a CA review your facts before you act or file.

FAQs

Does the 0.1% TCS on goods apply to sales made in March 2025?
Yes. The proviso says the sub-section does not apply "from the 1st day of April, 2025" (section 72(c), Finance Act 2025), so receipts before that date stayed under the old rule.

Did the Finance Act 2026 bring back TCS on sale of goods above ₹50 lakh?
The provisions of the Finance Act 2026 that I read for sections 393 and 394 of the 2025 Act do not insert a general goods entry or touch serial number 8(ii). Check the current text before you rely on this.

My buyer is deducting 0.1% from my payment. Is that wrong?
Not necessarily. It may be the buyer's TDS under section 194Q of the 1961 Act, or section 393 (Sl. No. 8(ii)) of the 2025 Act, which applies to a buyer whose preceding-year turnover is above ₹10 crore once purchases pass ₹50 lakh (section 402(6), 2025 Act).

Is the ₹50 lakh limit per invoice?
The text of the 2025 Act table refers to "any sum exceeding fifty lakh rupees for purchase of any goods", with tax on the sum above ₹50 lakh (Note 1(b)). Ask your CA how the limit is counted across invoices in your case.

Which Act do I cite for sales after 31 March 2026?
The Income-tax Act, 2025 applies from tax year 2026-27. For goods, the buyer's TDS sits in section 393 and the TCS table is in section 394. Name the Act in every reference.

Is the seller turnover test of ₹10 crore still relevant?
Only for old receipts under section 206C(1H). For the buyer's TDS under the 2025 Act, the ₹10 crore test applies to the buyer's turnover in the preceding tax year.

---

Next steps on annual compliance

See what applies to your company, then check it with a free tool.

Run a free compliance check →Compliance Health Check