Budget 2025: Period of ‘Stay’ by Court to be excluded to Calculate Time Limit u/s 206C

The Union Budget 2025 has proposed an amendment to the Income Tax Act, 1961, ensuring that the period during which a court grants a ‘stay’ will be excluded from the calculation of the time limit prescribed under Section 206C for tax collection at source (TCS).

Amendments to Section 206C in Budget 2025

1. Expansion of “Forest Produce” Definition:

Modification in Sub-Section (1): The term “Timber” is replaced with “Timber or any other forest produce (not being tendu leaves).” This expands the category of forest products covered under TCS (Tax Collected at Source) provisions.

Alignment with the Indian Forest Act, 1927: A new Explanation clarifies that “forest produce” shall carry the same meaning as defined in State Acts or the Indian Forest Act, 1927.

2. Reduction in TCS Rates:

The tax collection at source (TCS) rate for timber and other forest produce is reduced from 2.5% to 2%. For certain other categories, the TCS rate is also lowered to 2%.

Get a Copy of Direct Taxes Law and Practices Including Tax Planning with Free E-Book Access, Click Here

Read More: [BREAKING] No Income Tax upto Rs. 12 Lakh Income, proposes FM during Budget 2025

3. Changes to Sub-Section (1G) – Foreign Remittances:

The limit for TCS exemption on foreign remittances is increased from Rs. 7 lakh to Rs. 10 lakh.

Loans for Education Exemption: TCS shall not apply to remittances made for educational loans obtained from financial institutions under Section 80E.

4. Sub-Section (1H)

Exemption from 1st April 2025: A new proviso clarifies that sub-section (1H) shall cease to apply from April 1, 2025.

5. Court ‘Stay’ Period Exclusion in TCS Proceedings:

A new proviso in Sub-Section (7A) states that the provisions of Section 153(3), (5), and (6) along with Explanation 1 shall apply to the time limit in this section.

This means the period during which a court has granted a “stay” on proceedings shall be excluded while calculating the statutory time limit for TCS proceedings. This amendment ensures that litigation delays do not prevent tax authorities from completing assessments and enforcement actions.

Read More: Union Budget 2025: Key Highlights

The exclusion of the court stay period from the time limit calculation ensures that litigation does not obstruct TCS enforcement. The government has also relaxed TCS on foreign remittances, particularly for education loans, making it easier for students to fund overseas education.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates