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Union Budget 2026-27 - Finance Bill, 2026
H. RATIONALISATION OF OTHER DIRECT TAX PROVISIONS
Section 394(1) of the Act provides multiple rates for collection of tax at source (TCS). It is proposed to rationalize the rates of TCS by providing uniform rates to the extent possible. It is also proposed to reduce some of the rates so as to provide relief to the collectees.
2. Table: Sl. No. 1 of the said section provides that TCS on sale of alcoholic liquor for human consumption be collected at the rate of 1%. It is proposed that the rate shall be increased to 2%.
3. Table: Sl. No. 2 of the said section requires that 5% TCS be collected on sale of tendu leaves. It is proposed that the rate shall be reduced to 2%.
4. Table: Sl. No. 4 of the said section requires for collection of tax at source by the seller at the rate of 1% on sale of scrap. It is proposed that the rate shall be increased to 2%.
5. Table: Sl. No. 5 of the said section requires that TCS be collected at the rate of 1% on sale of minerals, being coal or lignite or iron ore. It is proposed that the rate shall be increased to 2%.
6. Table: Sl. No. 7 of the said sub-section requires for TCS on remittances made under Reserve Bank of India’s Liberalised Remittance Scheme (LRS). At present, TCS at 5% is collected if remittance is for the purposes of education or medical treatment and the remittance amount is more than ten lakh rupees. It is proposed to reduce the rate of TCS to 2%
8. Table: Sl. No. 8 of the said sub-section requires TCS at the rate of 5% and 20% on sale of overseas tour programme package including expenses for travel or hotel stay or boarding or lodging or any such similar or related expenditure. It is proposed to reduce the rate of TCS to 2%. It is further proposed that threshold for applicability of the provision be removed and TCS on sale of overseas tour programme package be collected at 2% irrespective of the amount. This will address the concern of shifting of business from domestic tour operators to overseas tour operators.
9. Therefore, rationalisation of TCS rates is proposed as follows:—
| Sl.No | Nature of receipt | Current Rate | Proposed Rate |
| 1. | Sale of alcoholic liquor for human consumption. | 1%. | 2%. |
| 2. | Sale of tendu leaves. | 5%. | 2%. |
| 3. | Sale of scrap. | 1%. | 2%. |
| 4. | Sale of minerals, being coal or lignite or iron ore. | 1%. | 2%. |
| 5. | Remittance under the Liberalised Remittance Scheme of an amount or aggregate of the amounts exceeding ten lakh rupees— | (a) 5% for purposes of education or medical treatment; (b) 20% for purposes other than education or medical treatment. | (a) 2% for purposes of education or medical treatment; (b) 20% for purposes other than education or medical treatment. |
| 6. | Sale of “overseas tour programme package” including expenses for travel or hotel stay or boarding or lodging or any such similar or related expenditure. | (a) 5% of amount or aggregate of amounts up to ten lakh rupees; (b) 20% of amount or aggregate of amounts exceeding ten lakh rupees. | 2% |
9. The amendment will take effect from the 1st day of April, 2026.
[Clause 73]
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