TDS 194Q vs TCS 206CR

Que. On Which transaction provision of the section 194Q not applicable? 

Ans. The provisions of this section shall not apply to a transaction on which

(a) tax is deductible under any of the provisions of this Act like sec. 194O; and 

(b) tax is collectible under the provisions of section 206C other than a transaction to which sub-section (1H) of section 206C applies.

The mutual exclusivity rule between Section 194Q and 206C(1H) works as follows:

Section 194Q (TDS by buyer) applies when:
- Buyer turnover > Rs 10 crore in preceding FY
- Purchase value from a single seller exceeds Rs 50 lakh in the FY
- TDS rate: 0.1% on the excess over Rs 50 lakh

Section 206C(1H) (TCS by seller) applies when:
- Seller turnover > Rs 10 crore in preceding FY
- Receipt from a single buyer exceeds Rs 50 lakh in the FY
- TCS rate: 0.1%

If both conditions are met, only 194Q applies ,  the buyer deducts TDS. The seller is relieved of collecting TCS under 206C(1H). This was clarified by the CBDT circular dated June 30, 2021.

The exception: if the seller has ALREADY collected TCS under 206C(1H) before the buyer could deduct under 194Q, the TCS collected is treated as discharged obligation and 194Q is not required for that payment.