In a significant move to simplify tax compliance and reduce the burden on sellers, the Indian government has announced the removal of Tax Collected at Source (TCS) on the sale of goods, effective from April 1, 2025.
Background
Previously, under Section 206C(1H) of the Income Tax Act, sellers with an annual turnover exceeding ₹10 crore were required to collect TCS at a rate of 0.1% on the sale consideration exceeding ₹50 lakh from a single buyer in a financial year.
Simultaneously, Section 194Q mandated buyers to deduct Tax Deducted at Source (TDS) at the same rate for similar transactions. This overlap often led to confusion and increased compliance challenges, as both TDS and TCS could be applied to the same transaction.
Key Changes Introduced in Budget 2025
Omission of TCS on Sale of Goods
The government has proposed to omit the provisions of Section 206C(1H) from April 1, 2025. This means sellers will no longer be required to collect TCS on the sale of goods exceeding ₹50 lakh.
Continuation of TDS Provisions
Buyers will continue to deduct TDS under Section 194Q at 0.1% on purchases exceeding ₹50 lakh from a resident seller. This ensures that tax is still collected at the source, but the responsibility now solely lies with the buyer, simplifying the process for sellers.
Benefits of the Amendment
Elimination of Dual Taxation
By removing the TCS requirement, the government has addressed the issue of both TDS and TCS being applied to the same transaction, thereby preventing double taxation.
Reduced Compliance Burden
Sellers are relieved from the obligation of collecting and depositing TCS, simplifying their tax compliance processes.
Enhanced Ease of Doing Business
This move is expected to streamline business operations, making it easier for sellers to manage large transactions without the added complexity of TCS provisions.
Conclusion
The removal of TCS on the sale of goods marks a significant step towards simplifying the tax regime in India. Sellers should update their accounting and compliance systems to reflect this change, effective from April 1, 2025.