The Statutory Brief

IT Act 1961 → 2025 / Section 206C

TCS

Section 206C → Section 394

Tax collected at source (TCS) on specified sales, LRS remittances, overseas tour packages, motor vehicles and parking/toll/mine leases

Section 206C of the old Income-tax Act, 1961 · new section 394 under the Income-tax Act, 2025

New reference Section 394 (certificates 395, compliance 397, 398)

Income-tax Act, 1961Section 206C

  • Rates (FY 2025-26): alcoholic liquor 1%, tendu leaves 5%, timber/forest produce 2%, scrap 1%, coal/lignite/iron ore 1%
  • Motor vehicle above ₹10 lakh: 1% (sub-section (1F))
  • LRS above ₹10 lakh: 5% for education/medical, 20% for other purposes; overseas tour package 5% up to ₹10 lakh and 20% above
  • Parking lot, toll plaza, mining/quarrying lease: 2%
  • TCS on sale of goods above ₹50 lakh (sub-section (1H)) does not apply from 1 April 2025

Applies to FY 2025-26 (AY 2026-27) and earlier years.

Income-tax Act, 2025Section 394 (certificates 395, compliance 397, 398)

  • One table in section 394(1) with nine entries
  • Finance Act 2026 rates from 1 April 2026: alcoholic liquor 2%, tendu leaves 2%, scrap 2%, coal/lignite/iron ore 2%
  • LRS above ₹10 lakh: 2% for education/medical, 20% for other purposes
  • Overseas tour package: flat 2% (the ₹10 lakh / 20% slab removed)
  • Timber/forest produce 2%, motor vehicles above ₹10 lakh 1%, parking/toll/mining 2%

Applies from tax year 2026-27 (from 1 April 2026).

What changed

A real rate change, not just renumbering. The Finance Act 2026 amended the new section 394 from 1 April 2026: several rates moved to a uniform 2% (up for liquor, scrap and minerals; down for tendu leaves, LRS education/medical and overseas tour packages). TCS on general sale of goods stays dropped.

Practice notes

  • Collections on or after 1 April 2026 follow section 394 rates. Collections up to 31 March 2026 stay under 206C.
  • No TCS by the authorised dealer on an education loan remittance from a financial institution, or where the seller has already collected on a tour package (section 394(4)).
  • Lower-collection certificates now sit in section 395(3); PAN-missing higher rates in section 397(2).

These are summaries, not the statutory text. Read the bare Act for both sections on the Income Tax Department's official site, which also has a side-by-side comparison utility.

Frequently asked

What are the TCS rates under the new Income Tax Act 2025?

From 1 April 2026 under section 394: 2% on liquor, tendu leaves, timber/forest produce, scrap and coal/lignite/iron ore; 1% on motor vehicles above ₹10 lakh; LRS above ₹10 lakh 2% for education/medical and 20% otherwise; overseas tour packages 2%; parking, toll and mining leases 2%.

What is section 206C called in the new Income-tax Act, 2025?

Section 206C of the Income-tax Act, 1961 corresponds to Section 394 (certificates 395, compliance 397, 398) of the Income-tax Act, 2025, which applies from 1 April 2026 (tax year 2026-27).

What changed in section 206C under the new Income Tax Act?

A real rate change, not just renumbering. The Finance Act 2026 amended the new section 394 from 1 April 2026: several rates moved to a uniform 2% (up for liquor, scrap and minerals; down for tendu leaves, LRS education/medical and overseas tour packages). TCS on general sale of goods stays dropped.

Is section 206C still applicable for FY 2025-26?

Yes. Income of FY 2025-26 (AY 2026-27) and earlier years is governed by section 206C of the 1961 Act. Section 394 (certificates 395, compliance 397, 398) of the 2025 Act applies from tax year 2026-27.

Related sections

194Q→393TDS by buyers on purchase of goods above ₹50 lakh195→393TDS on interest and other sums paid to non-residents (residual provision)