Finance Act 2020 had amended the provision of Section 206C of the Income-tax Act 1961 by inserting new sub-section (1H) which say that tax shall be collected by the seller from buyer, if (a) There is a sale of goods to such buyer. (b) 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 introduced in Budget 2021-22 which is related to payment of certain sum for 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 versus 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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