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

| Last updated: 07 June 2021

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The Income Tax Act, 1961 has two key sections concerning tax on the purchase of goods: Section 194Q, introduced in Budget 2021-22, requires buyers to deduct tax at 0.1% on purchases exceeding ₹50 lakhs. Section 206C(1H), inserted by the Finance Act 2020, mandates sellers to collect tax at 0.1% on sales exceeding ₹50 lakhs. While both sections target transactions over ₹50 lakhs, they apply to different parties (buyer vs. seller) and have different effective dates.

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 206C(1H): Tax on Goods Purchases

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