TCS Filing Changes from April 2025: Major Relief for Businesses

Most businesses don’t mind paying tax.

What they hate is collecting tax on behalf of the government, reconciling it every quarter, chasing customers for small amounts, and then explaining mismatches that shouldn’t have existed in the first place.

That’s exactly why Tax Collected at Source (TCS) has been such a pain point—especially after the expansion of TCS provisions in recent years.

Now, that’s changing.

From 1 April 2025, the government has rolled out a set of TCS filing changes that quietly remove some of the biggest compliance burdens for businesses. And from 1 April 2026, another important procedural change kicks in.

If you sell goods, deal with foreign remittances, trade in forest produce, or handle TCS returns, this matters more than it looks.

Let’s break it down clearly—what changed, why it matters, and what you should do next.

Quick Refresher: What Is TCS and Why It Matters

Before getting into changes, let’s set the context.

Tax Collected at Source (TCS) is a tax that sellers collect from buyers at the time of sale or receipt of payment for certain transactions, and then deposit with the government.

(Official reference: Income Tax Department – TCS overview
https://www.incometax.gov.in/iec/foportal/help/tcs)

In theory, it improves tax tracking.
In practice, it increased:

Working capital pressure
Compliance workload
Reconciliation issues with customers

The latest changes are clearly aimed at simplifying compliance without reducing transparency.

Removal of TCS on Sale of Goods: A Big Win for Businesses

Removal of TCS on Sale of Goods (Section 206C(1H))

This is the headline change.

From 1 April 2025, TCS on sale of goods under Section 206C(1H) is removed.

Earlier, if your business turnover exceeded ₹10 crore and you sold goods worth more than ₹50 lakh to a customer, you had to collect TCS—even if margins were thin and payments were delayed.

(Section reference:
https://www.incometaxindia.gov.in/pages/acts/income-tax-act.aspx)

What this removal means in real life:

No more collecting 0.1% TCS on routine B2B sales
No follow-ups with customers for small TCS amounts
No quarterly reconciliation headaches for goods sales

Example:
A manufacturing company selling raw materials to distributors no longer needs to track cumulative customer sales just to check TCS applicability.

This single change dramatically reduces friction for trading, manufacturing, and wholesale businesses.

LRS Remittance Threshold Increase: Fewer Transactions Under TCS Net

LRS Remittance Threshold Increase to ₹10 Lakh

Under the Liberalised Remittance Scheme (LRS), individuals remitting money abroad were subject to TCS once thresholds were crossed.

The new rule increases the threshold to ₹10 lakh, meaning smaller remittances are now outside the TCS net.

(Official LRS reference:
https://www.rbi.org.in/scripts/FAQView.aspx?Id=115)

This directly benefits businesses and professionals who:

Send money abroad for services
Support overseas business expenses
Facilitate client payments

It also reduces unnecessary TCS credits that individuals earlier had to claim as refunds through income-tax returns.

No TCS on Education Loans: Relief for Students and Families

No TCS on Education Loans Funded by Financial Institutions

Earlier, even education-related foreign remittances could attract TCS, depending on the source of funds.

Now, no TCS applies on foreign remittances for education when funded through education loans from approved financial institutions.

(Income Tax clarification source:
https://www.incometax.gov.in/iec/foportal/help/lrs-tcs)

This change might not affect businesses directly, but it reflects a broader policy intent:

TCS should not create hardship where income generation isn’t involved.

It also simplifies compliance for banks, NBFCs, and education consultants handling overseas education payments.

Reduced Rate for Forest Produce: Sector-Specific Relief

Reduced Rate for Forest Produce Transactions

Businesses dealing in specified forest produce (other than timber) will now benefit from a reduced TCS rate.

This is especially relevant for:

Traders
Processors
Exporters operating on tight margins

Lower rates mean:

Less cash flow blockage
More accurate pricing
Reduced disputes with buyers

It’s a small technical change—but meaningful for businesses operating at scale in these sectors.

Decriminalization of Late Payments: A Shift in Compliance Philosophy

Decriminalization of Late Payments and Procedural Relief

One of the less talked-about but important shifts is the decriminalization of certain late TCS payments.

Instead of immediately triggering prosecution risks, the focus is now on:

Monetary penalties
Interest recovery
Procedural compliance

This aligns with the broader government push toward decriminalization of minor economic offences
(Policy background:
https://dea.gov.in/decriminalisation-economic-legislation)

For compliant businesses, this reduces fear-driven compliance and allows focus on accuracy over panic.

From April 1, 2026: Time Limit on TCS Correction Statements

2-Year Limit on Correction Statements

Starting 1 April 2026, correction statements for TCS returns can only be filed within two years from the end of the relevant financial year.

This means:

Errors can’t be fixed indefinitely
Old mismatches won’t linger forever
Businesses must reconcile returns on time

Practical takeaway:
You’ll need stronger internal checks during filing—because “we’ll correct it later” won’t always be an option.

Action Steps for Businesses

Here’s what businesses should do now:

Review whether TCS on sale of goods still applies to your transactions
Update accounting and ERP systems from April 2025
Train teams on revised LRS and sector-specific rules
Strengthen reconciliation processes before the 2026 correction limit applies

Early preparation avoids last-minute confusion.

Common Mistakes to Avoid

Continuing to collect TCS on goods out of habit
Ignoring sector-specific rate changes
Delaying reconciliation assuming unlimited correction time
Misapplying LRS thresholds

Most errors won’t come from ignorance—but from outdated processes.

Pro Tips from the Ground

Update client communication templates—many buyers will expect TCS removal immediately
Align finance and sales teams on revised applicability
Close TCS reconciliations quarterly, not annually
Keep documentation clean—simplification doesn’t mean lax scrutiny