Section 206C(1H): TCS on Sale of Goods (FY 2025–26 Complete Guide)

Section 206C(1H) introduced Tax Collected at Source (TCS) on sale of goods to widen the tax base and track large commercial transactions.

This provision often causes confusion because of its overlap with Section 194Q (TDS on purchase of goods).

This WonderTax guide explains:

• When Section 206C(1H) applies

• Who collects TCS

• Rates & thresholds

• Interaction with Section 194Q

• Practical examples

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What Is Section 206C(1H)?

Section 206C(1H) requires a seller to collect TCS on sale of goods from a buyer if prescribed conditions are satisfied.

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Applicability Conditions (ALL Must Be Met)

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TCS Rate Under Section 206C(1H)

👉 TCS applies only on amount exceeding ₹50 lakh.

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When Is TCS Collected?

• At the time of receipt of consideration

• Not at the time of invoice

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Example: TCS Calculation

• Total sales to buyer: ₹80 lakh

TCS applicable on:
₹80L – ₹50L = ₹30L

TCS @0.1% = ₹3,000

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Overlap with Section 194Q (Very Important)

👉 TDS under 194Q overrides TCS under 206C(1H).

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GST Impact

• If GST shown separately → TCS on base value only

• If GST not separated → TCS on total receipt

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Compliance Requirements

• Deposit TCS by 7th of next month

• File Form 27EQ (Quarterly)

• Issue Form 27D

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Common Mistakes

• Collecting TCS when buyer is liable under 194Q

• Applying TCS on first ₹50 lakh

• PAN not collected

• Wrong quarter reporting

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Internal Links (WonderTax)

• 194Q vs 206C(1H) Comparison
  https://wondertax.in/tds-vs-tcs

• TDS & TCS Return Filing
  https://wondertax.in/tds-return-filing

• Income Tax Notice Handling
  https://wondertax.in/services/income-tax-notice-handling

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CTA – WonderTax

👉 Confused whether TDS or TCS applies on goods transactions?

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