Detailed Explanation
How it works
Examples include TCS on sale of motor vehicles above Rs.10 lakh, scrap, and foreign remittances under LRS. The buyer can claim the TCS as a credit against income tax.
Where TCS actually applies now
After the Finance Act 2025 rationalisation, the main live TCS heads are: sale of motor vehicles above Rs.10 lakh (1%), foreign remittances under LRS above Rs.10 lakh per year (5% for education/medical via loan carve-outs and rates up to 20% for other remittances and overseas tour packages), sale of scrap and specified forest produce, and e-commerce operators' 0.5% collection under GST Section 52 (a separate GST-side TCS). The TCS on sale of goods under 206C(1H) was discontinued from 1 April 2025, removing the 194Q/206C(1H) overlap headache.
Worked example
An individual remits Rs.18,00,000 under LRS for an overseas investment in FY 2026-27. TCS applies on the amount above Rs.10,00,000: 20% × Rs.8,00,000 = Rs.1,60,000, collected by the AD bank. This is not a cost — it is a credit claimable in the return, and salaried remitters can have it adjusted against salary TDS by declaring it to the employer in Form 12BAA.
Compliance notes
The collector deposits TCS by the 7th of the following month, files Form 27EQ quarterly, and issues Form 27D. From 1 April 2026, TCS operates under Section 394 of the Income-tax Act 2025. Verify current rates at incometax.gov.in — LRS rates have moved repeatedly since 2023.
Frequently asked questions
What is TCS?
Tax collected by a seller from a buyer on specified transactions under Section 206C.
Can TCS be claimed back?
Yes, it is a creditable prepaid tax adjusted against income tax in the return.
This content is for general guidance only and does not constitute professional advice. Tax law changes frequently — verify the current position and consult a qualified Chartered Accountant before acting. Last reviewed: June 2026.