Comparison of section 194Q TDS and 206C(1H) TCS

Finance Act 2020 had amended section 206C of the Income-tax Act 1961 by inserting a new subsection (1H) which says that the seller is required to collect the tax if the sale of goods to buyers exceeds Rs.50 lakhs.

Finance Act 2021 inserted a new section 194Q which says that the buyer is required to deduct the tax if the purchase of goods from the seller exceeds Rs. 50 lakhs

• Under section 194Q the buyer is liable to deduct the tax while under section 206C(1H) the seller is required to collect the tax.
• As per Section 194Q (1) “buyer” means a person whose total sales, gross receipts, or turnover from the business exceeds
• 10 Crores during the financial year immediately preceding the financial year in which the purchase of goods is carried out. The seller is not Defined here.
• While as per Section 206C (1H) “buyer” means a person who purchases any goods, but does not include-

a) Government

b) Local Authority

c) Importer of the goods. As Section 206C(1H) mentions: “seller” means a person whose total sales, gross receipts, or turnover from the business carried on by him exceeds

• 10 Crores during the financial year immediately preceding the financial year in which the sale of goods is carried out.
• Threshold Limit- Under Section 194Q- Value of Purchase Exceeds Rs. 50 Lakh Under Section 206C(1H)- If the Value of Consideration Exceeds Rs. 50 Lakh
• Under Section 194Q the rate of TDS/ TCS is 0.1% if the Value of Purchase >50 Lakh. If the PAN is not Furnished then 5%. While under Section 206C(1H)- 0.1%, if the Value of Sales >50 Lakhs. If the PAN is not Furnished then 5%.
• Time of Deduction/ Collection- Under Section 194Q- Credit to seller or Payment to the seller, whichever is earlier. Under Section 206C(1H)- At the time of Receipt.

Section 194Q (5) Specifies: The provisions of this section shall not apply to a transaction on which: –

• Tax is deductible under any provisions of this Act: and
• Tax is collectible under the provisions of Section 206C, other than a transaction to which subsection (1H) of Section 206C applies.

It can be said that the 194Q will Prevail over 206C (1H) if both seller and Buyer are Liable for Compliance.

The second proviso to Section 206C(1H) provides “the provisions of this subsection shall not apply if the buyer is liable to deduct tax at source under any other provisions of this Act on the goods purchased by him from the seller and has deducted such amount.

• Effective date- Under Section 194Q- 01/07/2021 Under Section 206C(1H)- Already Applicable from 01/10/2020
• Effects on Advance Payments- Under Section 194Q- TDS to be Deducted on Advance Payments made for the purchase of Goods while Under Section 206C(1H)- If the buyer is deducting TDS, then TCS is not required to collect.

Both the Provisions will apply only in the case where Buyer and Seller both are Resident, if one of them is Non-Resident then these Provisions will not Apply.

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