TCS on Sale of Goods: Section 206C(1H) Explained for Sellers
Reviewed by CA Nikhil Gupta · Last reviewed 17 June 2026
If you run a business with turnover above ₹10 crore and one of your customers pays you more than ₹50 lakh in a financial year, Section 206C(1H) requires YOU as the seller to collect an additional 0.1% from that customer as Tax Collected at Source - on top of the invoice value. Here's exactly when this applies and how it's collected.
What Is Section 206C(1H)?
Section 206C(1H) requires a seller of goods to collect Tax Collected at Source (TCS) from a buyer at the time of receipt of consideration for sale of goods, if certain turnover and threshold conditions are satisfied. Unlike most TCS provisions (which apply to specific goods like scrap, minerals, or liquor), Section 206C(1H) is a general provision applicable to sale of goods broadly.
Who Is Required to Collect TCS Under Section 206C(1H)?
| Condition | Requirement |
|---|---|
| Seller's turnover/gross receipts | Must exceed ₹10 crore in the financial year immediately preceding the year of sale |
| Receipt of sale consideration from a single buyer | Must exceed ₹50 lakh in the financial year (TCS applies only on the amount received in excess of ₹50 lakh) |
| Buyer | Various categories of buyers are excluded (e.g., government, certain notified persons); also excluded if the buyer is liable to deduct TDS under 194Q on the same transaction |
TCS Rate and Collection Trigger
- Rate: 0.1% on the sale consideration received in excess of ₹50 lakh from a buyer in a financial year (a higher rate applies if the buyer's PAN is not available, typically 1%).
- Trigger: TCS is collected at the time of receipt of payment (not at the time of sale/invoicing) - this is a key distinction from TDS, which is typically deducted at the time of credit or payment, whichever is earlier.
206C(1H) vs 194Q: Which One Applies?
Both provisions can potentially apply to the same buyer-seller transaction (seller's turnover > ₹10 crore AND buyer's turnover > ₹10 crore, with purchase/sale value > ₹50 lakh). The law resolves this overlap clearly:
Worked Example
| Particulars | Amount |
|---|---|
| Seller's turnover in preceding FY | ₹30 crore (exceeds ₹10 crore threshold - 206C(1H) applies) |
| Total receipts from Buyer Y during the year | ₹90,00,000 |
| Threshold | ₹50,00,000 |
| Amount liable for TCS (90,00,000 − 50,00,000) | ₹40,00,000 |
| TCS @ 0.1% on ₹40,00,000 | ₹4,000 |
How Is TCS Reflected and Claimed by the Buyer?
TCS collected under Section 206C(1H) is reflected in the buyer's Form 26AS/AIS as tax already collected on their behalf. The buyer can claim credit for this TCS amount against their total tax liability for the year when filing their ITR - similar to how TDS credit works, except this is "collected" rather than "deducted."
Compliance Obligations for Sellers
- Collect TCS at 0.1% on receipts exceeding ₹50 lakh from each buyer (tracked buyer-wise, cumulatively for the financial year).
- Deposit the TCS collected with the government within prescribed due dates.
- File quarterly TCS returns (Form 27EQ) reporting Section 206C(1H) collections.
- Issue a TCS certificate (Form 27D) to the buyer.
- Maintain buyer-wise records of receipts to track when the ₹50 lakh threshold is crossed during the year.
Frequently Asked Questions
Source and review trail
Use the current official instrument, portal or regulator publication before acting. This panel separates the category authority from page-specific references.
- Primary category
- Income Tax
- Official starting point
- www.incometax.gov.in
Page source links
The prior page did not embed a page-specific external source. The category authority above is the minimum verification starting point; a specific instrument should be added when available.
Primary sources & related provisions
Statutory provisions referenced in this guide: