Decriminalisation of TCS Payment Delays: FM Fulfills Budget 2025 Promise

The Ministry of Finance has released an update on TCS/TDS relaxations for taxpayers under its “Delivery on Budget Promises (2025-26)”.

The Central Board of Direct Taxes ( CBDT ) observed that transactions involving the sale of goods were subject to both TDS and TCS, leading to duplicate compliance on the same transaction.

With effect from April 1, 2025, the government took steps to remove this overlap and simplified the tax deduction/collection mechanism.

As part of the implementation, the Finance Ministry stated that TCS on sale of goods has been omitted, with the Finance Act, 2025 inserting a proviso to Section 206C(1H) clarifying that its provisions shall not apply from April 1, 2025.

“Sections 206AB and 206CCA, which previously mandated higher tax rates for those who failed to file income tax returns, have been omitted. Higher TDS/TCS rates now apply only in cases where the taxpayer fails to furnish their PAN under Section 206AA, effective from 1st April, 2025” stated the Ministry of Finance.

‘No prosecution proceedings to be initiated against a collector for a delay in depositing tax to the government's credit, provided the tax is deposited before the deadline for filing the quarterly statement under Section 206C(3). This measure took effect from 1st April, 2025’ the Ministry says with regards to the decriminalisation of payment delay in the TCS.

The ministry, through this status conveyed that the promise of the budget has been fulfilled.