CA Preksha Choraria
Quick Summary
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 | 206C(1H) | |
| Particulars | Remarks | |
| Purpose |
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| Applicable to |
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| Counter party |
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| Triggering point |
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| W.e.f |
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| Timing |
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| Advances |
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| Rate of TDS/TCS |
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| PAN not available-Rate of TDS |
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| On which amount |
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| Not applicable to |
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| Exclusions |
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If Buyer is-
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| TAN Requirement |
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| When to deposit/collect |
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| Quarterly statement to be filed |
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| Certificate to be issued to seller/buyer |
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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.
FAQ :
Section 194Q deals with Tax Deducted at Source (TDS) on the purchase of goods, applicable to the buyer. Section 206C(1H) deals with Tax Collected at Source (TCS) on the sale of goods, applicable to the seller.
For Section 194Q, the buyer's turnover from business must exceed Rs. 10 crore in the previous year (excluding GST). For Section 206C(1H), the seller's turnover from business must exceed Rs. 10 crore in the previous year (excluding GST).
Both sections are triggered when the purchase or sale consideration for goods exceeds Rs. 50 lakhs in a previous year. The value of goods includes GST.
TDS under Section 194Q is to be deducted at the time of payment or credit, whichever is earlier, including on advance payments. TCS under Section 206C(1H) is collected at the time of receipt of sale consideration, including advances.
The general rate for both TDS under Section 194Q and TCS under Section 206C(1H) is 0.1%. For FY 2020-21, the TCS rate was 0.075%.
If TDS has been deducted under Section 194Q, then Section 206C(1H) will not apply to that transaction, indicating that only one section's compliance is required.
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