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Finance Act 2021 has introduced Section 194Q providing TDS on purchase of goods applicable w.e.f from 1st July 2021. Section 194Q is similar to Section 206C(1H) which was introduced by Finance Act 2020, requiring Seller to collect tax at source on transactions between a buyer and a seller. The below table covers a Comparative analysis of both the Sections of Income Tax Act, 1961 with illustrations simplifying the provisions.

Comparative Analysis of Section 194Q and Section 206C(1H)

Particulars

Section 194Q (TDS)

Section 206C(1H) (TCS)

Effective Date

1st July, 2021

1st October, 2020

Person responsible

Buyer

Seller

Applicability/ Turnover Limit

Turnover of Buyer > Rs 10 Cr in preceding Financial Year

Turnover of Seller > Rs 10 Cr in preceding Financial Year

Counter Party

Resident Seller

Resident Buyer

TDS/TCS Rates

0.1% on amount of Purchase of goods exceeding Rs. 50 Lakhs

0.1% on amount of Sale consideration received exceeding Rs. 50 Lakhs

5% (If PAN not available)

1% (If PAN not available)

Threshold Limit

Threshold Limit of Rs. 50 lakhs shall be computed from 01-04-2021.

Threshold of Rs. 50 lakhs shall be computed from 01-04-2020.

Point of Taxation

Payment or Credit whichever is earlier

At the time of receipt

TDS/TCS on Advance Payment/Receipts

Yes

Yes

TDS/TCS Payment

7th of Next Month

7th of Next Month

TDS/TCS Return Form

26Q

27EQ

TDS/TCS Certificate

Form - 16A

Form - 27D

Whether TCS u/s 206C (1H) or TDS u/s 194Q will apply?

Both TDS u/s 194Q and TCS u/s 206C(1H) will not apply on the same Transaction. In case of potential overlap between the above provisions TDS u/s 194Q will apply and TCS u/s 206C(1H) will not apply.

Sample Illustrations

Examples

TCS u/s 206C (1H) or TDS u/s 194Q

Buyer's Turnover - 20 Cr, Seller's Turnover - 5 Cr & Transaction Value - 1 Cr

TDS u/s 194Q

Buyer's Turnover - 5 Cr, Seller's Turnover - 20 Cr & Transaction Value - 1 Cr

TCS u/s 206C (1H)

Buyer's Turnover - 20 Cr, Seller's Turnover - 20 Cr & Transaction Value - 1 Cr

TDS u/s 194Q

Buyer's Turnover - 5 Cr, Seller's Turnover -
5 Cr & Transaction Value - 1 Cr

NA

Buyer's Turnover - 20 Cr, Seller's Turnover - 20 Cr & Transaction Value - 25 Lakhs

NA

Non Applicability

If TDS is applicable under any other provisions of the act.

If TDS is applicable under any other provisions of the act.

Transactions on which TCS is applicable under 206C other than 206C(1H).

If buyer is -
a) Importer of goods
b) Center/State Govt., Local Authority
c) An embassy, High Commission, Consulate and trade representation of a foreign state

 
 

Disclaimer: The information contained in this document prepared is for information purpose only. Please consult your professional before making any decision or taking any action using information contained in this document.


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Category Income Tax, Other Articles by - CA Harshal Jain 



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