Difference between Section 194Q and Section 206C (1H) of IT Act, 1961

Last updated: 08 March 2023

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This article clarifies the distinctions between Section 194Q and Section 206C(1H) of the Income Tax Act, 1961, both concerning transactions of goods exceeding fifty lakh rupees. Section 194Q applies to buyers responsible for deducting tax at source (TDS), while Section 206C(1H) applies to sellers collecting tax at source (TCS). The key differences lie in their applicability, timing of deduction/collection, and specific conditions regarding buyer/seller turnover.

Section 194Q vs 206C(1H): Key Differences Explained

Particulars	Section 194Q	Section 206C (1H)
Applicable from	01.07.2021	01.10.2020
Applicable to	Buyer	Seller
Applicability point	Any person, being a buyer who is responsible for paying any sum to any resident (hereafter in this section referred to as the seller) for purchase of any goods of the value or aggregate of such value exceeding fifty lakh rupees in any previous year, shall, at the time of credit of such sum to the account of the seller or at the time of payment thereof by any mode, whichever is earlier, deduct an amount equal to 0.1 per cent. of such sum exceeding fifty lakh rupees as income-tax.	Every person, being a seller, who receives any amount as consideration for sale of any goods of the value or aggregate of such value exceeding fifty lakh rupees in any previous year, shall, at the time of receipt of such amount, collect from the buyer, a sum equal to 0.1 per cent of the sale consideration exceeding fifty lakh rupees as income-tax:
Applicability point	For the purposes of this section, “buyer” means a person whose total sales, gross receipts or turnover from the business carried on by him exceed ten crore rupees during the financial year immediately preceding the financial year in which the purchase of goods is carried out	For the purposes of this section, "seller" means a person whose total sales, gross receipts or turnover from the business carried on by him exceed ten crore rupees during the financial year immediately preceding the financial year in which the sale of goods is carried out
Timing of deduction/collection	Payment or credit, whichever is earlier	At the time of receipt
Advances	TDS shall be deducted on advance payment made	TCS shall be collected on advance receipts
PAN not available – Percentage of Rate	5%	1%
Quarterly statement to be filed	26Q	27EQ
Certificate to be issued	Form 16A	Form 27D
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 the government by 7th day of subsequent month
Return filling period	Quarterly	Quarterly
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 hereby, in a situation where TDS has been deducted u/s 194Q, this section will not apply)