Collection of tax at source
Section 394(1) of Income Tax Act 2025
(1) Every person, as specified in column C of the Table below shall collect tax––
(a) on receipts specified in column B;
(b) at the rate as specified in column D; and
(c) at the time of debiting of the amount payable by the buyer or licensee or lessee to the account of the buyer or licensee or lessee or at the time of receipt of such amount from the said buyer or licensee or lessee in cash or by way of a cheque of a draft or any other mode, whichever is earlier.
Table
TAX COLLECTION AT SOURCE
| Sl. No. | Nature of receipt | Person | Rate of Tax Collected at Source |
|---|---|---|---|
| A | B | C | D |
| 1 | Sale of alcoholic liquor for human consumption. | Seller. | 1% |
| 2 | Sale of tendu leaves. | Seller. | 5% |
| 3 | Sale of timber whether obtained under a forest lease or otherwise; or any other forest produce (not being timber or tendu leaves) obtained under a forest lease. | Seller. | 2% |
| 4 | Sale of scrap. | Seller. | 1% |
| 5 | Sale of minerals, being coal or lignite or iron ore. | Seller. | 1% |
| 6 | Sale consideration exceeding ₹10,00,000 in case of— (a) motor vehicle; or (b) any other goods, as notified by the Central Government. | Seller. | 1% |
| 7 | Remittance under the Liberalised Remittance Scheme of an amount or aggregate of the amounts exceeding ₹10,00,000— | Authorised dealer. | (a) 5% for purposes of education or medical treatment; (b) 20% for purposes other than education or medical treatment. |
| 8 | Sale of “overseas tour programme package” including expenses for travel or hotel stay or boarding or lodging or any such similar or related expenditure | Seller. | a) 5% of amount of aggregate of amounts up to ₹10,00,000; (b) 20% of amount or aggregate of amounts exceeding ₹ 10,00,000. |
| 9 | Use of parking lot or toll plaza or mine or quarry for the purpose of business, excluding mining and quarrying of mineral oil (including petroleum and natural gas). | Licensor or Lessor | 2% |
Section 394(2) of Income Tax Act 2025
(2) The collection of tax shall not to be made in respect of receipts specified in sub-section (1) (Table: Sl. No. 1 to 5) in respect of the buyer, who is a resident in India, if he furnishes a written declaration in duplicate in such form and manner, as prescribed, to the person responsible for collecting tax, mentioning that such goods are to be utilised––
(a) for the purposes of manufacturing, processing or producing articles or things or for generating power; and
(b) not for trading purposes.
Section 394(3) of Income Tax Act 2025
(3) Where no collection of tax is to be made under sub-section (2), the person responsible for collecting tax shall deliver, one copy of the declaration referred to in that sub-section, to the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, on or before the seventh day of the month following the month of receipt of that declaration.
Section 394(4) of Income Tax Act 2025
(4) The collection of tax shall not be made by the authorised dealer in respect of receipt specified in serial number 7 of the Table in sub-section (1) on such amount on which tax has been collected by the seller referred to in serial number 8 of the Table in sub-section (1).
Section 394(5) of Income Tax Act 2025
(5) The collection of tax shall not be made by the authorised dealer or seller, in respect of receipt specified in sub-section (1) (Table: Sl. No. 7 and 8), if the buyer is liable to deduct tax at source under any other provisions of this Act and he has deducted such tax.
Section 394(6) of Income Tax Act 2025
(6) For the purposes of this sub-section, “forest produce” shall have the same meaning as defined in any State Act for the time being in force, or in the Indian Forest Act, 1927.