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Section 194Q V/s 206C (1H)

 What is Section 194Q?

Section 194Q is for Tax deducted at source (TDS) applicable from 01.07.2021.

What is Section 206C (1H)?

Section 206C (1H) is for Tax Collected at source (TCS) applicable from 01.10.2020.

A person is liable to deduct TDS under Section 194Q when the below conditions are satisfied-

  • The person (who is a buyer) has turnover/gross receipts/Sales from business of above Rs.10 crore during the previous F.Y 2020-21.
  • A buyer needs to deduct TDS at the rate of 0.1 per cent for purchase of any goods of the value or aggregate of such value exceeding fifty lakh rupees in any previous year. (On incremental amount)

A person is liable to deduct TCS under Section 206C (1H) when the below conditions are satisfied-

  • The person (who is a seller) has turnover/gross receipts/Sales from business of above Rs.10 crore during the previous F.Y 2020-21.
  • A seller needs to collect TCS at the rate of 0.1 per cent on receipts of sale consideration for sale of any goods of the value or aggregate of such value exceeding fifty lakh rupees. (On Incremental Amount)

TDS will be the deducted when-

  • TDS shall be deducted at the time of Payment or credit to the seller whichever is earlier.
  • TDS shall be deducted on advance payment made.
  • TDS shall be deducted at the rate of
  • 0.1% on amount exceeding Rs.50 Lakhs.
  • 5% on amount exceeding Rs.50 Lakhs, in case of non-availability of PAN.

TCS will be the collected when-

  • At the time of Receipt of sale proceeds.
  • When advance is received.
  • 0.1% on amount received exceeding Rs.50 Lakhs.
  • 1% on amount exceeding Rs.50 Lakhs, in case of non-availability of PAN.

Examples: To Identify Taxability and applicable provisions on expected transactions

Sr. No. Buyers Turnover Sellers Turnover Transaction Value Taxable Amount Section Applicability Remarks
1 12 crore 7 crore 53 Lakh 3 Lakh 194Q TDS by Buyer
2 7 crore 13 crore 54 Lakh 4 Lakh 206C (1H) TCS by Seller
3 14 crore 15 crore 55 Lakh 5 Lakh 194Q TDS by Buyer
4 6 crore 9 crore 52 Lakh NA Turnover is below taxable limit
5 11 crore 13 crore 45 Lakh NA Turnover is below taxable limit

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Author Bio

Hi, I am CMA Harsh Goel. I have 5+ year experience (Post Qualification) in finance and Accounts profile. Before 2016 I was into in Teaching Profession, where I spent around 8 Years. You can reach out to me at 9718108139 for any query related to Taxation and Finance. View Full Profile

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