The Union Budget 2026 has reduced the Tax Collected at Source rate to two percent, a move designed to ease the financial burden on taxpayers and improve cash flow. Tax Collected at Source requires sellers to collect tax from buyers at the time of sale and deposit it with the government.
With the reduction to two percent, individuals and businesses will have lower upfront tax payments on transactions, which can free up funds for investment or daily expenses. The change is expected to particularly benefit sectors such as e-commerce, bullion, and foreign remittances where higher TCS rates were previously applied.
The lower rate also simplifies compliance for both buyers and sellers by reducing the immediate financial impact of high-value transactions. Although the overall tax liability remains unchanged, taxpayers can now manage cash more efficiently and plan their finances better. Analysts suggest that this measure could encourage more participation in formal financial channels and reduce the reliance on informal transactions.
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