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194Q versus 206C(1H) of the Income Tax act, 1961

The Finance Bill, 2021 has introduced section 194Q - TDS on purchase of goods which is having resemblance to section 206C(1H)- TCS on Sale of Goods brought in by Finance Bill, 2020. There is ambiguity regarding their simultaneous applicability to businesses, which is explained as under:

194Q Vs. 206C(1H) of the Income Tax act, 1961
  194Q 206C(1H)
Particulars Remarks  
Purpose
  • Tax to be DEDUCTED
  • Tax to be COLLECTED
Applicable to
  • Buyer/Purchaser
  • Seller
Counter party
  • Resident Seller
  • Resident Buyer
Triggering point
  • Turnover/Gross Receipts/Sales from the business of BUYER should exceed Rs.10cr during previous year (Excluding GST)
  • Purchase of goods of aggregate value exceeding Rs.50Lakhs in P.Y.
  • (The value of goods includes GST)
  • Turnover/Gross Receipts/Sales from the business of SELLER should exceed Rs.10cr during previous year (Excluding GST)
  • Sale consideration received exceeds Rs.50Lakhs in P.Y.
  • (The value of goods includes GST)
W.e.f
  • 01/07/2021
  • 01/10/2020
Timing
  • Payment or credit, whichever is earlier
  • At the time of receipt
Advances
  • TDS shall be deducted on advance payments made
  • TCS shall be collected on advance receipts
Rate of TDS/TCS
  • 0.1%
  • 0.1% (0.075% for FY 2020-21)
PAN not available-Rate of TDS
  • 5%
  • 1%
On which amount
  • On amount exceeding Rs.50 Lakhs
  • On amount exceeding Rs.50 Lakhs
Not applicable to
  • Transactions on which TDS is applicable under other provisions of the act
  • Transactions on which TCS is applicable under section 206C other than 206C(1H)
  • Transactions on which TDS/TCS is applicable under other provisions of the act and the same has been complied with
  • (Meaning thereby; in a situation where TDS has been deducted u/s 194Q, this section will not apply)
Exclusions
  • Yet to be notified by government
If Buyer is-
  • Importer of goods
  • Central/State Government, Local Authority
  • An embassy, High Commission, legation, commission, consulate and trade representation of a foreign state.
TAN Requirement
  • Yes
  • Yes
When to deposit/collect
  • Tax so deducted shall be deposited with government by 7th day of subsequent month
  • Tax so collected shall be deposited with government by 7th day of subsequent month
Quarterly statement to be filed
  • 26Q
  • 27EQ
Certificate to be issued to seller/buyer
  • Form 16A
  • Form 27D

Example:

Sr No. Buyers Turnover Sellers Turnover Transaction Value Section Applicable
1 5Cr 11Cr 55Lakhs 206C(1H)
2 15Cr 7Cr 58Lakhs 194Q
3 12Cr 13Cr 54Lakhs 194Q
4 7Cr 5Cr 58Lakhs NA
5 12Cr 15Cr 45Lakhs NA
 
 

The views expressed above are of the author and does not intent for any professional guidance.

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Attached File : 967401_43911_194q.pdf

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Category Income Tax, Other Articles by - CA Preksha Choraria 



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