Section 206C: Interest on Delayed TCS Collection Explained

Section 206C

Section 206C: Interest on Delayed TCS Collection Explained

Section 206C

When it comes to tax compliance, timely collection and deposit of Tax Collected at Source (TCS) is crucial. Section 206C of the Income Tax Act, 1961 governs the provisions relating to TCS. A common issue faced by many businesses is the late collection of TCS, which triggers interest liability.

As per Section 206C of the Income Tax Act, any person responsible for collecting TCS who fails to collect it on time is liable to pay interest. This interest is not on the transaction value but on the TCS amount that was due to be collected.

Interest Rate on Late Collection

If TCS is not collected by the due date, the collector becomes liable to pay simple interest at the rate of 1% per month or part of a month. This applies from the date on which TCS was collectible to the date it is actually collected.

Period of Interest Calculation

The interest period begins from the date the TCS was due for collection and ends on the actual date of collection. Importantly, even a fraction of a month is considered a full month for interest computation.

✔️ Example:

If TCS for April is collected in June, interest is applicable for three full months – April, May, and June – regardless of the exact number of days.

Interest Computation Base

Interest is not levied on the transaction value but on the TCS amount that was required to be collected.

Rounding Off of Period

For the purpose of interest calculation:

  • A calendar month is considered.

  • Any part of a month is treated as a full month.

Illustrative Example

ParticularsAmount / Details
TCS amount due₹1,00,000
Month of liabilityApril
Actual collectionJune
Interest rate1% per month
Total interest liability₹3,000
Interest calculation₹1,00,000 × 1% × 3 months

Important Notes on Time Period

  • A month is always taken as a calendar month, not 30 days or any custom duration.

  • Even a 1-day delay into the next calendar month invites a full month’s interest.

Practical Scenarios

S. No.Due Date for CollectionActual Collection DateInterest Period
115-04-202515-04-20250 months
215-04-202516-04-20251 month
315-04-202501-05-20252 months
415-04-202531-05-20252 months
515-04-202530-06-20253 months

As seen above, even a small delay crossing into the next calendar month leads to additional interest.

Tax Treatment of Interest

  • Disallowed Expense: Interest paid on late collection of TCS cannot be claimed as a deductible expense under the Income Tax Act.

  • Permanent Difference: Since this interest is disallowed, it results in a permanent difference in the computation of taxable income. Hence, no deferred tax is created on this liability.

Legal Provision (Bare Act Reference)

According to Section 206C(7) of the Income Tax Act:

“If the person responsible for collecting tax does not collect it, or after collecting fails to pay it as required, he shall be liable to pay simple interest at 1% per month or part thereof, from the date such tax was collectible to the date it is actually collected.”

In addition:

  • If the tax is collected but not deposited, interest is charged at 1.5% per month or part thereof from the date of collection to the date of deposit.

  • If the collector is not treated as an assessee in default under certain circumstances, interest applies only up to the date of filing of return by the buyer.

Section 206C

Final Thoughts

Timely collection and deposit of TCS is not just a matter of compliance—it can also save your business from interest costs that cannot be written off as expenses. A good accounting and compliance process is essential to ensure that such delays are avoided.

Read More: New Tax Regime Deductions for FY 2025-26: What’s In, What’s Out, and Who Should Opt In

Key Takeaways

  • Interest at 1% per month applies to delayed collection of TCS.

  • Interest is calculated on the TCS amount, not the transaction value.

  • Even a 1-day delay leads to 1 full month of interest.

  • The interest cannot be claimed as an expense—it’s a permanent disallowance.

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Opting for Old Tax Regime? Know How to File Form 10-IEA

Old Tax Regime

Opting for Old Tax Regime? Know How to File Form 10-IEA

Old Tax Regime

As the Income Tax Return (ITR) season kicks off, taxpayers are once again faced with the choice between the new and old tax regimes. While the new regime is now the default option (since FY 2023-24), many individuals—especially those with business or professional income—may still find the old regime more beneficial due to its wide range of deductions and exemptions.

If you’re planning to stick with the old tax regime for FY 2024-25 (AY 2025-26), and you have business/professional income, Form 10-IEA is the form you need to file. Here’s everything you need to know.

What is Form 10-IEA and Why is it Important?

Form 10-IEA is a declaration form that allows eligible taxpayers to opt out of the new tax regime and continue under the old tax regime. This becomes necessary because the Income Tax Department now considers the new tax regime as the default for all taxpayers.

So, if you want to claim deductions under sections like 80C, HRA, home loan interest, etc., and you have business or professional income, filing Form 10-IEA is mandatory.

Old Tax Regime

Who Needs to File Form 10-IEA?

ou are required to file Form 10-IEA if:

  • You are an Individual, HUF, AOP (other than co-operative societies), BOI, or Artificial Juridical Person, and

  • You have income under the head ‘Profits and Gains of Business or Profession’, and

  • You are filing ITR-3 or ITR-4.

If you do not have business or professional income (e.g., salary, house property, or capital gains), you can opt for the old regime directly in your ITR (such as ITR-1 or ITR-2). Form 10-IEA is not required in that case.

Important Due Dates

Form 10-IEA must be filed on or before the due date for filing your return under Section 139(1):

  • For most individuals (not subject to audit): 15th September 2025

  • For businesses subject to audit: 31st October 2025

⚠️ Tip: File Form 10-IEA before filing your ITR. You’ll need the acknowledgement number of the form for your return.

How to File Form 10-IEA: Step-by-Step Online Guide

Filing is fully online through the Income Tax Department’s e-filing portal. Here’s how:

Step 1: Log In to the Portal

  • Visit incometax.gov.in

  • Log in using your PAN and password

  • New user? Register first.

Step 2: Access Income Tax Forms

  • Go to the ‘e-File’ menu

  • Click ‘Income Tax Forms’ > ‘File Income Tax Forms’

Step 3: Locate Form 10-IEA

  • Search for Form 10-IEA in the list or search bar

  • Click ‘File Now’

Step 4: Choose Assessment Year

  • Select AY 2025-26 (for FY 2024-25 income)

Step 5: Confirm Business Income

  • Answer ‘Yes’ if you have income under Profits and Gains of Business or Profession

  • Also, choose your applicable due date (based on audit status)

Step 6: Confirm Your Tax Regime Choice

  • Confirm that you’re opting out of the new tax regime

Step 7: Fill the Form Sections

i. Basic Information

  • Pre-filled PAN, name, etc. Review carefully.

  • Select whether you’re opting out for the first time or re-entering the old regime.

  • Click ‘Save’

ii. Additional Information

  • Relevant only if you have income from IFSC units.

  • If not applicable, this section will be inactive or greyed out.

iii. Declaration and Verification

  • Confirm all details

  • Agree to terms

  • Click ‘Save’

  • Preview the form before proceeding

Step 8: e-Verify the Form

Choose any one method:

  • Aadhaar OTP

  • Digital Signature Certificate (DSC)

  • Electronic Verification Code (EVC)

Step 9: Submit the Form

After verification, click ‘Yes’ to submit

Step 10: Save the Acknowledgement

  • On success, you’ll get:

    • Transaction ID

    • Acknowledgement Number

  • Save or download a PDF copy under ‘View Filed Forms’

Key Points to Keep in Mind

🔸 File Before ITR: Always file Form 10-IEA before your Income Tax Return, especially if you’re reporting business/profession income.

🔸 One-Time Opt-Out: Generally, opting out of the new regime is a one-time option for business/profession taxpayers. Once opted out, you continue under the old regime in future years—unless you switch back, which is permitted only once in a lifetime.

🔸 Accuracy Matters: Double-check all entries before submission. Errors can delay processing or invite notices.

🔸 Keep a Record: Always download and store a copy of the filled Form 10-IEA and acknowledgement number.

Read More: Key Changes in Forms 3CB and 3CD for AY 2025-2026: What Businesses and Auditors Must Know

Form 10-IEA is more than just a declaration—it’s your formal gateway to continuing with the old tax regime and availing yourself of valuable tax deductions. If you’re a taxpayer with business or professional income and plan to stay in the old regime for FY 2024-25, filing this form on time is essential.

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Section 80GG: Deduction For Rent

House rents can turn into a genuine weight for the most part in the metropolitan urban communities where getting a house on lease is troublesome. Since the interest for the leased house is so high, the lease additionally getting soar as time passes. Be that as it may, in the event that you are a salaried worker and gets HRA or you have your own home in the town, you may require not to stress. Be that as it may, for the individuals who need to lease a house however don’t get HRA (House Rent Allowance), it might hurt their month to month pay. In any case, there is an arrangement in the Income Tax Act, which can be a deliverer for you. Pay Tax Act segment 80GG enables you to guarantee a conclusion on the measure of lease you pay each year.

What is Income Tax Act Section 80GG?

80GG is a segment in the Income Tax Act of India, under which an individual, either individual or HUF can guarantee a derivation on the lease that is paid towards an outfitted or empty house. The house must be being used for their private settlement.

By derivations, here we mean the sum you can deduct from your gross salary of the year to infer at the net assessable pay on which the pay expense would be charged.

How to claim deduction under Section 80GG?

There are sure conditions which you have to meet to be qualified for the reasonings under Section 80GG. Here are those criteria –

  • One can guarantee reasoning under this area in the event that the person is independently employed or salaried.
  • Organizations can’t guarantee conclusion under this area for their rental costs.
  • You being an individual or a Hindu Undivided Family (HUF) must be qualified for get this conclusion.
  • In the event that you are salaried, you should not accepting any HRA advantages and you are not by any means qualified for get thus, to profit the advantage of segment 80GG.
  • In the event that the measure of lease surpasses Rs. 1 lakh, at that point you have to indicate PAN subtleties of the Landlord (proprietor) of the house to demonstrate that you are living there as an occupant on lease.
  • To demonstrate that you are not guaranteeing the finding on a house or a private property that is involved by you in the area or some other area of your work.
  • You can guarantee finding under this segment on any sort of private property which is empty, outfitted or even semi outfitted where you remain as an inhabitant.
  • On the off chance that the citizen gets any sort of comparative derivation in that appraisal year, at that point the individual in question or the HUF can’t get conclusion under this 80GG segment.

What will be the quantum of deduction under section 80GG?

The measure of conclusion can be the least of any of the accompanying three –

  • Rs. 5000 every month or yearly Rs. 60000
  • 25% of the yearly pay of the individual or the HUF
  • Sum inferred in the wake of deducting 10% of the complete pay from the measure of all out lease paid in the money related year.

Examples

For understanding the measure of conclusion that you can be qualified for betterly, here is a precedent.

Assume, your companion Samiksha is procuring Rs. 5 lakh p.a. She lives in Mumbai in a leased loft and pays a lease of Rs.15000 every month. In this way, her all out lease every year is Rs. 180000. Presently, according to the previously mentioned criteria, the three potential outcomes can be –

  • Rs. 60000 every year
  • 25% of 5 lakhs = 1.25 lakhs
  • 180000-(10% of 500000) = Rs.130000

In this way, the least of this three sum is Rs. 60000. So your companion can guarantee and get a finding of Rs. 60000 every year on the all out pay for the lease she pays.

Who can claim Deductions under this act?

An individual who lives in a leased private house and she or he should be an individual or HUF not accepting any HRA from their boss can get the reasoning.

Exemptions

There are sure situations where you can’t guarantee the finding regardless of whether you meet the previously mentioned criteria –

  • You are the proprietor of a house in the city or the town where you are utilized or doing your business (independent work).
  • For them who are remaining with their folks in the parental house, can’t get derivation under this area.

The Trick

Along these lines, you are living with your folks or some other relative where you don’t pay any lease yet need to benefit the finding under 80GG. All things considered, you have to pay the lease to your folks or relative at any rate on paper that is you need the receipts of lease installment of in any event Rs. 60000 to profit the base conclusion. In any case, the contort is your folks need to demonstrate the lease as their salary from lease in their government form.

What is the data required for claiming deduction under segment 80GG?

To guarantee the finding under segment 8oGG, you have to record the essential subtleties.

  • Your name
  • The location of the private reason where you have been living on lease. You need to give the full location the postal code too
  • Your PAN subtleties
  • The residency for which you are living in the leased property
  • Measure of lease and mode (through money, bank store and so on.) of installment
  • The location and name of the proprietor of the house. (for example landowner).
  • As referenced above also, if the lease you pay surpasses Rs. 1 lakh in a year, alongside your PAN subtleties you need to give the PAN subtleties of your proprietor.
  • An affirmation that you don’t possess any private property on your name or your companion name and even on the name of your minor kid or as an individual from HUF.

Synopsis

Under Section 80GG of the Indian Income Tax Act 1961, any individual or HUF (no Companies) can guarantee a reasoning on the measure of lease they pay for their settlement. To guarantee the reasoning the individual or the HUF must act naturally utilized or salaried. Also, in the salaried activity, individual or the HUF must not be qualified for get any HRA (for that appraisal year). The least of Rs. 60000 every year or 25% of the absolute pay in a year or the sum determined by deducting 10% of the all out salary from the complete lease paid in a year can be asserted as the conclusion. The assessee must not claim any private property on his or her name and not even on relatives like a life partner or minor kid’s name, else, they can’t be qualified for get any derivation under this segment.