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Section 194Q of the Income Tax Act, 1961 is applicable with effect from 1st July 2021 to any buyer who is responsible for paying any sum to any resident seller for purchase of any goods of the value or aggregate of value exceeding fifty lakh rupees in any previous year. The buyer, at the time of credit of such sum to the account of the seller or at the time of payment, whichever is earlier, is required to deduct an amount equal to 0.1 % of such sum exceeding fifty lakh rupees as income tax.

Section 206(1H) of Income Tax Act, 1961 is applicable with effect from 1st October,2020 If seller receives an amount exceeding INR 50 Lakhs from a buyer against sale of goods made, then seller shall be liable to collect TCS on an amount exceeding INR 50 Lakhs at the rate of 0.1% of the amount received. The tax shall be collected by the seller from buyer, on an amount received exceeding INR 50 Lakhs at the rate of 0.1%.

Article presents Comparative Analysis of Section 194Q & Section 206(1H)

Particulars Section 194Q (TDS) Section 206(1H)(TCS)
Effective Date 1st July,2021 1st October ,2020
Person Responsible Buyer Seller
Applicability /Turnover Limit Turnover of Buyer > Rs. 10 Cr in preceding FY Turnover of Seller > Rs. 10Cr in preceding FY
TDS /TCS Rates 0.1% on amount of Purchase of goods exceeding Rs. 50 Lakhs 0.1% on amount of Sale Consideration received exceeding Rs. 50 Lakhs
5% (If PAN not available) 1%( If PAN not available)
Threshold Limit Threshold Limit of Rs.50 Lakhs shall be computed from 01-04-2021 Threshold Limit of Rs.50 Lakhs shall be computed from 01-04-2020
Whether TCS u/s 206C(1H) or TDS u/s 194Q will apply? Both TDS u/s 194Q and TCS u/s 206(1H) will not apply on the same Transaction. In case of potential overlap between the above provisions TDS u/s 194Q will apply and TCS u/s 206(1H) will not apply.
Sample Illustrations Examples TCS u/s 206(1H) or TDS u/s 194Q
Buyer’s Turnover-20 Cr, Seller’s Turnover-5 Cr & Transaction Value – 1Cr TDS u/s 194 Q
Buyer’s Turnover- 5 Cr, Seller’s Turnover- 20 Cr & Transaction Value – 1Cr TCS u/s 206C(1H)
Buyer’s Turnover- 20 Cr, Seller’s Turnover- 20 Cr & Transaction Value – 1Cr TDS u/s 194Q
Buyer’s Turnover- 5 Cr, Seller’s Turnover- 20 Cr & Transaction Value – 1Cr NA
Buyer’s Turnover- 20 Cr, Seller’s Turnover- 20 Cr & Transaction Value – 25 Lakhs NA

Note : In case of deduction of TDS under section 194Q – TDS Should be deducted on the Transaction Value excluding of GST. However, in case of collection of TCS, GST on sale value should also be added while collecting TCS on sales.

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Anubhav has over 5 years of professional experience in handling Audit & Assurance of various entities, Direct & Indirect Tax Advisory services, Project financing, Litigation Services, RERA, Preparation and Finalization of Income Tax returns, Monthly Compliance which includes GST, TDS and oth View Full Profile

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