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Finance Act 2020 had amended Section 206C of the Income-tax Act 1961 by inserting a new subsection (1H) that says that tax shall be collected by the seller from the buyer if there is a sale of goods to such buyer and the seller receives any amount as consideration for the sale of any goods of the value or aggregate of such value exceeding INR 50 lakhs in any previous year from such buyer.

A new section 194Q was introduced in Budget 2021-22 which is related to the payment of a certain sum for the purchase of goods. As per this section, 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 Rs. 50 lakhs(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 percent of such sum exceeding fifty lakhs rupees as income-tax.

Section 194Q vs Section 206C (1H) of The Income Tax Act, 1961

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 percent. of such sum exceeding fifty lakh rupees as income tax.

Every person, being a seller, who receives any amount as consideration for the 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 percent of the sale consideration exceeding fifty lakh rupees as income-tax:

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

The tax so deducted shall be deposited with the government by the 7th day of the subsequent month

The tax so collected shall be deposited with the government by the 7th day of the subsequent month

Return filling period

Quarterly

Quarterly

Not applicable to

  1. Transactions on which TDS is applicable under other provisions of the act
  2. 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)

For Example

Sr. No.

Buyer Turnover

Seller Turnover

Transaction Value

Section Applicable

1

5

15

60

206C (1H)

2

15

8

72

194Q

3

12

15

60

194Q

4

7

5

52

NA

5

12

15

45

NA

 
 

Meant for educational purposes only


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Category Income Tax, Other Articles by - ASHOK PITRODA 



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