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Sellers of motor vehicles above ₹10 lakh and goods exceeding ₹50 lakh cumulative per buyer must collect TCS under Section 206C, with threshold tracking per buyer PAN per financial year.
Track cumulative sales per buyer PAN to detect ₹50L threshold crossing, apply TCS at specified rates per goods category, reconcile TCS collected against TCS deposited via challan and Form 27EQ filed.
Section 206C(1F) at 1% on motor vehicles above ₹10L, 206C(1H) at 0.1% above ₹50L cumulative (abolished April 2025), quarterly Form 27EQ filing, interest 1%/month on late deposit.
Buyer-wise cumulative sales tracker, TCS collection register, challan-to-Form 27EQ reconciliation, and buyer TCS credit confirmation for Form 26AS.
Section 206C imposes TCS collection obligations on sellers of specified goods in India, with interest at 1% per month for late deposit under Section 206C(7). For motor vehicle dealers, scrap traders, and mining companies, TCS on luxury goods reconciliation in India requires matching collection records against government deposits and Form 27EQ filings every quarter.
What TCS on Luxury Goods Covers
Tax Collected at Source (TCS) under Section 206C is the reverse of TDS: the seller collects tax from the buyer at the point of sale and remits it to the government. Section 206C(1) covers specific categories — alcoholic liquor for human consumption, tendu leaves, timber, scrap, and minerals including coal, lignite, and iron ore. Section 206C(1F) adds motor vehicles exceeding ₹10 lakh in value. Until March 2025, Section 206C(1H) required TCS at 0.1% on sale of any goods exceeding ₹50 lakh in aggregate per buyer per year. Finance Act 2025 abolished 206C(1H), but prior-period transactions still need reconciliation against TCS reconciliation for sellers and buyers.
How TCS Luxury Goods Reconciliation Works
Step 1: Collection Tracking
The seller must track every sale that crosses a TCS-applicable threshold. For motor vehicles, this is straightforward — each sale above ₹10 lakh triggers 1% TCS. For goods that fell under 206C(1H) before April 2025, the seller had to monitor cumulative sales per buyer PAN across the financial year. Once cumulative sales to a single buyer crossed ₹50 lakh, TCS at 0.1% applied to amounts above the threshold. Missing the threshold crossing point is the primary source of under-collection.
Step 2: Challan Deposit Matching
After collecting TCS, the seller deposits it with the government via Challan 281. The reconciliation step matches the amount collected per buyer against the challan amount deposited for the same period. Mismatches arise when multiple buyers’ TCS is pooled into a single challan, making buyer-level verification dependent on internal records rather than the challan itself.
Step 3: Form 27EQ Filing and Buyer Credit
The seller files Form 27EQ each quarter, declaring buyer-wise TCS details. The buyer sees the credit in Form 26AS. Reconciliation must confirm that every buyer PAN reported in Form 27EQ matches the actual buyer, the section code is correct (206C(1F) vs 206C(1H) vs 206C(1)), and the amount matches the collection record. Errors in Section 206AB higher TDS for non-filers compliance — where higher rates apply to specified persons — add another layer of variance.
TCS Rates by Goods Category
| Goods Category | Section | TCS Rate | Threshold | Filing Form |
|---|---|---|---|---|
| Motor vehicles | 206C(1F) | 1% | Sale value above ₹10 lakh | Form 27EQ |
| Scrap | 206C(1) | 1% | No monetary threshold | Form 27EQ |
| Timber (not tendu) | 206C(1) | 2.5% | No monetary threshold | Form 27EQ |
| Minerals (coal, lignite, iron ore) | 206C(1) | 1% | No monetary threshold | Form 27EQ |
| Tendu leaves | 206C(1) | 5% | No monetary threshold | Form 27EQ |
| Alcoholic liquor (for human consumption) | 206C(1) | 1% | No monetary threshold | Form 27EQ |
| Any goods (abolished Apr 2025) | 206C(1H) | 0.1% | Cumulative above ₹50 lakh per buyer per FY | Form 27EQ |
Compliance Context and Cumulative Threshold Tracking
The core difficulty in TCS luxury goods reconciliation in India is cumulative threshold tracking. A motor vehicle dealer selling 200 vehicles per month has a clear per-transaction trigger. But a scrap dealer or mineral trader selling to the same set of 30 buyers throughout the year needed to maintain running totals per buyer PAN under the now-abolished 206C(1H). Any gap in PAN-level tracking resulted in either under-collection (exposing the seller to interest at 1% per month) or over-collection (requiring adjustment or refund to the buyer).
TDS reconciliation software that supports TCS workflows can automate this threshold tracking by mapping each sale to a buyer PAN and maintaining the cumulative counter across the financial year. TransactIG’s multi-pass matching engine handles the challan-to-collection matching with a baseline-to-matched rate improvement from 51% to 88%, reducing quarterly reconciliation from days to hours for dealers with high transaction volumes.
For organisations managing reconciliation software India-wide deployments, consolidating TCS and TDS reconciliation into a single workspace eliminates the need to run separate processes for Form 27EQ and Form 26Q.
Current TCS rates, Form 27EQ filing instructions, and Section 206C provisions are available on the Income Tax India e-filing portal.
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