prpri Comparative Analytical Summary of Section 206C(1H) & 194Q Comparative Analytical Summary of Section 206C(1H) & 194Q

Comparative Analytical Summary of Section 206C(1H) & 194Q of Income Tax Act 1961:

i Section & purpose 206C(1H) for Tax Collection at Source 194Q for Tax Deduction at Source
ii Introduced by Finance Act & applicable to Finance Act 2020 & applicable to Seller Finance Act, 2021 & applicable to Buyer
iii With effect from 1st day of September 2020 1sy day of July 2021
iv When Collected or Deducted [Treatment for advances]
  • At the time of receipt
  • TCS shall be collected on advance receipts
Payment or credit, whichever is earlier TDS shall be deducted on advance payments  made

1 Applicability Entity having turnover/ gross receipts/ sales of more than INR 10 crore in the preceding Financial Year shall be liable to deduct TCS under this section.

TCS shall be collected by the seller from the buyer, if the following conditions are satisfied

i) There is a sale of goods

ii) Value or aggregate value of sale exceeding  Rs. 50 Lacs [threshold limit of 50 Lacs is for per buyer per year]

Note: TCS is to be collected at the time of actual  receipt of consideration by the seller.

The entity having turnover/ gross receipts/ sales of more than INR 10 crore in the preceding Financial Year shall be liable to deduct TDS under this section.

TDS shall be deducted by the purchaser from the seller, if the following conditions are satisfied

i) There is a purchase of goods

ii)Value or aggregate value of purchase exceeding Rs. 50 Lacs [threshold limit of 50 Lacs is for per buyer per year]

Note: TDS is to be deducted at the time of credit or payment whichever is earlier.

TCS U/S 206C(1H) will not be applicable, if TDS U/S 194Q is enforceable, as the provision of section 206C (1H) itself states that the provisions of section 206C(1H) shall not apply if the buyer is liable to deduct tax at the source under any other provision of this Act and has deducted such amount.

In this scenario, seller must take a declaration from  the buyer  that they have deducted TDS U/S 194Q and  comply with the same before refraining to apply the provisions of section 206C(1H)

 

2 Exclusions Certain exclusions of buyers

(a) The Central Government, a State Government, an Embassy, a High Commission, legation, commission, consulate and the trade representation of a foreign state; or

(b) A local Authority defined in the Explanation to section 10(20); or

(c) Importer of goods or any other person notified by the Central Government.

(d) With respect to the individual seller with whom the sale of goods doesn’t exceeds Rs. 50 Lacs in the current financial year.

(e) Sale of services either in India or outside India

(f) Export of goods.

(g) Sale of goods covered under section 206C(1)/ 206C(1F)/ 206C(1G)

(h) Transactions in securities (and commodities) traded through recognized stock exchange.

(a) With respect to the individual buyer with whom the purchase of goods doesn’t exceeds Rs. 50 Lacs in the current financial year.
3 Rate of Tax 0.1 percent of the sale consideration or  aggregate of sale considerations exceeding fifty lakh rupees, it means no TCS at first fifty lakh rupees. 0.1 percent of the value of goods purchased or aggregate of such values exceeding 50 Lacs in any previous year, it means no TDS at first fifty lakh rupees.
4 If PAN is not provided by entity TCS will be collected @ 1% TDS will be deducted @ 5%
5 Due date & Penal Provisions:

Tax collection, Deposition

Tax collected during the month shall be deposited on or before the 7th day of the next month in which TCS/ TDS has been collected/ Deducted. For the month of March due date is the 30th day of the following month i.e. 30th April.

To deposit the TDS/ TCS, the collector has to fill the Challan No ITNS 281.

If the assessee fails to collect/ deduct or after collection/ deduction  fails to deposit the same to the credit of the central government, then he shall be deemed to be assessee-in-default & liable to pay interest @ 1% or 1.5% respectively for every month or part thereof on the amount of tax he fails to collect/ deduct or pay.

Interest shall be calculated for the period starting from the date of default till the date on which tax is deposited.

Interest is to be paid before furnishing the return.

6 Return filing Date Form 27EQ for each quarter On or before the 15th day of the following month  of the quarter ending period, i.e. Form 26Q for each moth

On or before the last day of the following month of the quarter ending period, i.e.

Quarter 1: 15th July Quarter 1: 31st July
Quarter 2: 15th October Quarter 2: 31st October
Quarter 3: 15th January Quarter 3: 31st January
Quarter 4: 15th May Quarter 4: 31st May
7 Issue of Certificate Certificate in Form 27D within fifteen days from the due date for  furnishing the statement/ return of TCS i.e. Certificate in Form 16A

Within 15 days from the due date for furnishing the statement /return of TDS i.e.

Quarter 1: 30th July Quarter 1: 15th August
Quarter 2: 30th October Quarter 2: 15th November
Quarter 3: 30th January Quarter 3: 15th February
Quarter 4: 30th May Quarter 4: 15th June
8 Default in the filing of Quarterly Return Fails to furnish the quarterly return shall be liable to  pay late the filing fee U/S 234E @ Rs. 200 per day till the default continues subject to a maximum of tax collected/ deducted during the quarter as the case may be.

The late fee should be paid before the filing of the return. U/S 271H assessee in default may liable to pay a penalty of INR 10,000/-, which can go up to INR 1,00,000/-. Penalty U/S 271H will not be charged if

  • TCS/ TDS is paid to the credit of the government
  • Late filing fee & interest (if any) is paid to the
  • credit of the government
  • TCS/ TDS return is filed before the expiry
  • of one year from the due date
9 CBDT Circular Relevant points of Circular 17/29.09.2020

  • In computing, the threshold limit of 50 Lacs sales made till 30th Sep’20 need to be considered.
  • There is no requirement of adjustment on account  of sales return or discount or indirect tax including GST is required to be made for the collection of tax U/S 206C(1H)
  • TCS would apply on all sale considerations,
  • including advance received for sale, received on or

after 1st Oct’20 even if the sale was carried out before 1st Oct’20.

[for detailed study it may be referred to the following link:

https://taxguru.in/income-tax/tds-section-194o-cbdt-issues-guidelines.html

10. Example

Applicability of TCS rate has been illustrated in the below table:
Particulars/

FY →

2019-20 2020-21 2021-22 2022-23
Sales 100 60 55 65
Outstanding balance as on 1st day of the year NIL 40

[Rs 55 Lacs received before 30.9.20]

10 20
Total Receipt 60 90 45 75
Outstanding balance as on last day of the year 40 10 20 10
TCS to be collected Nil TCS 90-55= 35*.075%= 0.02625 Nil TCS 15*.1%= .015
INR in lacs

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