TCS Section 206C(1H): Quarterly Deposit Deadlines and the 0.1% Rate Trigger

Tomorrow, 11 May 2026, opens the third week of May with Indian businesses crunching toward the Form 27EQ filing window for the fourth quarter of fiscal 2025-26. The statement, governed by Rule 31AA of the Income-tax Rules, 1962, must reach the Income Tax Department by 31 May 2026 — a Sunday this year, which pushes the working deadline to Monday, 1 June 2026. Sellers who relied on Section 206C(1H) for the 0.1% Tax Collected at Source levy on bulk receipts will find FY 2025-26 a transitional year: the sub-section was omitted by Section 197 of the Finance (No.2) Act, 2024 with effect from 1 April 2025, leaving residual reconciliation work for FY 2024-25 collections still circulating in buyer Form 26AS records.

Statutory Deadlines

Monday, 11 May 2026, has no specific Income-tax Act filing deadline of its own, but it begins a fortnight that compliance teams cannot afford to coast through. The seventh of every month is the standard cut-off for depositing TDS and TCS collected during the previous month — for April 2026 collections that deadline was 7 May 2026 (Thursday) and is already behind us under Rule 30(2) and Rule 37CA. The next live deadlines cluster between 15 May and 1 June.

Sellers who collected TCS under Section 206C(1) on liquor, scrap, timber and minerals; Section 206C(1F) on motor vehicles above Rs 10 lakh and notified luxury goods; or Section 206C(1G) on LRS drawals and overseas tour packages must report those collections on Form 27EQ for January-March 2026. Section 206C(1H) will not feature in any FY 2025-26 quarter, but a buyer reconciling Form 26AS for FY 2024-25 may still see late-correction TCS credits, which CBDT addresses through Section 154 rectifications and TRACES correction statements via the Income Tax e-filing portal.

Market Events

Tomorrow's headline event is the absence of one. The Reserve Bank of India's Monetary Policy Committee held the repo rate at 5.25% on 8 April 2026 — its second consecutive pause after the 2025 easing cycle that took rates from 6.50% to 5.25% in cumulative cuts of 125 basis points. Stance remains "neutral", and the next bi-monthly review is on 3-5 June 2026, so 11 May arrives in a quiet patch of the policy calendar. The Standing Deposit Facility stands at 5.00%, the Marginal Standing Facility at 5.50% and the Bank Rate at 5.50%; CPI for FY 2026-27 is projected at 4.6% with GDP growth at 6.9%.

For Indian equity markets, Monday's session opens after the routine weekend gap. The compliance backdrop is unusually dense — listed companies must file Q4 FY 2025-26 annual audited results by 30 May 2026 under SEBI LODR Regulation 33, so the next three weeks bring a continuous flow of board outcomes that will move both the Nifty 50 and mid-cap stocks. Use Oquilia's SIP planner to test whether the volatility warrants the step-up SIP path, and compare a deferred lumpsum entry against staggered tranches across the 20-trading-day window to 30 May 2026.

Earnings

There is no list of confirmed Q4 FY 2025-26 board meetings published in our briefing for 11 May 2026, and we will not invent one. What is verifiable is the regulatory clock that frames the entire pipeline. Regulation 33(3)(d) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, requires every listed entity to submit annual audited standalone financial results within 60 days from the end of the financial year. For FY 2025-26 — which closed on 31 March 2026 — that takes the absolute deadline to 30 May 2026.

Because Q4 disclosures are rolled into the audited annual filing, listed entities have effectively 60 days to publish both the quarter and the full-year set together. Investors with concentrated single-stock exposures should treat the 19-day stretch from 11 May to 30 May 2026 as a defined event-risk window before any pre-results positioning.

The 206C(1H) Framework: 0.1%, Rs 50 Lakh, Rs 10 Crore

Section 206C(1H), inserted by the Finance Act, 2020 with effect from 1 October 2020, mandated every seller whose total sales, gross receipts or turnover from business exceeded Rs 10 crore in the immediately preceding financial year to collect tax at source on receipts of sale consideration from a buyer in excess of Rs 50 lakh in any previous year. The default rate was 0.1% of the consideration exceeding Rs 50 lakh; if the buyer had not furnished PAN or Aadhaar, the rate climbed to 1% under Section 206CC of the Income-tax Act, 1961.

The provision excluded receipts from buyers covered under Section 206C(1) on liquor, tendu leaves, timber, scrap and minerals; Section 206C(1F) on motor vehicles; and Section 206C(1G) on LRS remittances and overseas tour packages. It also excluded transactions where the buyer was the Central Government, a State Government, an embassy or a foreign-State trade representation, or a person importing goods into India under Section 2(23) of the Customs Act, 1962.

Sub-section (1H) carried its own carve-out: it did not apply to a transaction on which tax was deductible under any other provision and the buyer had deducted such amount. Read with Section 194Q from FY 2021-22 onwards, that clause created a five-year period of buyer-deducts-then-seller-skips reconciliation. CBDT Circular 13 of 2021, dated 30 June 2021, fixed the order of priority: where both 194Q and 206C(1H) could apply on the same transaction, 194Q would govern and the seller's collection obligation would lapse.

Quarterly Deposit and Form 27EQ Statement Mechanics

For collections under Section 206C(1H) — and for every other live TCS section — the deposit pipeline runs on a fixed monthly cadence. Tax collected during a month must be credited to the Central Government by the seventh day of the following month under Rule 37CA, and the cumulative quarterly statement is filed in Form 27EQ. Form 27EQ deadlines mirror Form 26Q, the corresponding TDS quarterly statement, under Rule 31AA(2) read with Rule 31A.

For Q4 FY 2025-26, that places the Form 27EQ wall at 31 May 2026; with the date falling on a Sunday, the practical cutoff is 1 June 2026. The Form 27D certificate to the buyer follows on 15 June 2026. Late filing attracts a Rs 200 per day fee under Section 234E (capped at the TCS amount), plus a separate Section 271H penalty of Rs 10,000 to Rs 1 lakh — a sharper sting than the underlying tax for many small consignments. Use Oquilia's advance-tax planner to model how a TCS credit changes the residual demand for AY 2026-27, and the TCS calculator for any 206C(1G) liberalised remittance crossing Rs 10 lakh.

Section 194Q: The Operative Twin From 1 April 2025

With Section 206C(1H) omitted by Section 197 of the Finance (No.2) Act, 2024 from 1 April 2025, the operative 0.1% leg now sits exclusively on the buyer side under Section 194Q. A buyer with turnover above Rs 10 crore in the preceding FY must deduct 0.1% of purchase consideration above Rs 50 lakh from a single seller. The rate is identical to the lapsed seller-side levy, and the deposit pipeline mirrors any other Section 194 deduction — by the seventh of the following month, with quarterly Form 26Q statements due 31 July, 31 October, 31 January and 31 May.

Buyers planning their FY 2026-27 procurement cycle must reset vendor masters: every seller crossing Rs 50 lakh in cumulative purchases now needs a 194Q deduction at source rather than a 206C(1H) collection. Glossary readers can deepen the framework via Oquilia's notes on TCS, TDS and Form 26AS.

FAQ

When is Form 27EQ for Q4 FY 2025-26 due?

Form 27EQ for January-March 2026 is due on 31 May 2026 under Rule 31AA(2). Because 31 May 2026 falls on a Sunday, the working deadline shifts to Monday, 1 June 2026. The corresponding Form 27D buyer certificate must be issued by 15 June 2026.

Does Section 206C(1H) still apply in FY 2025-26?

No. Sub-section (1H) of Section 206C was omitted by Section 197 of the Finance (No.2) Act, 2024 with effect from 1 April 2025. Sellers do not collect 0.1% TCS on receipts above Rs 50 lakh from FY 2025-26 onwards. Reconciliation for collections made up to 31 March 2025 continues to flow through Form 26AS for AY 2025-26.

What replaced Section 206C(1H) from 1 April 2025?

Section 194Q, inserted by the Finance Act, 2021 with effect from 1 July 2021, is the surviving 0.1% leg. The buyer with turnover above Rs 10 crore in the preceding FY deducts 0.1% on purchase consideration above Rs 50 lakh from any single seller. CBDT Circular 13 of 2021 had already established 194Q's priority over 206C(1H); the omission of (1H) closes the loop.

What is the penalty for late filing of Form 27EQ?

Under Section 234E, a fee of Rs 200 per day applies for each day the statement is late, capped at the total TCS amount payable for that quarter. A separate penalty under Section 271H of Rs 10,000 to Rs 1 lakh may be levied where the delay is unjustified.

Where can buyers see TCS credits before filing their ITR?

TCS credits flow into Form 26AS via the Income Tax Department's e-filing portal and into the Annual Information Statement issued under Section 285BB. Mismatches between the seller's Form 27EQ filing and the buyer's claim are a frequent trigger for Section 154 rectification at the Centralised Processing Centre, Bengaluru.

Is the next RBI policy event before the Form 27EQ deadline?

No. The Reserve Bank of India's next Monetary Policy Committee review is scheduled for 3-5 June 2026, which falls after the Form 27EQ deadline of 31 May 2026 (deemed 1 June 2026 because of the Sunday). The repo rate currently stands at 5.25% with a neutral stance, held unchanged at the 8 April 2026 MPC meeting after a cumulative 125 basis points of cuts during 2025.