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

CA Harshal Jain , Last updated: 18 June 2021
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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
TDS/TCS Rates	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.
Non Applicability	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.