Summary & How to Comply with 194Q and 206C (1H) of Income Tax Act, 1961

TDS on payment for purchase of goods u/s 194Q (W.e.f 01.07.2021)

Buyer whose Sales/Gross receipts/turnover/ exceeds 10 Cr in Previous Financial year and paying any sum to seller for purchase of goods and aggregate value exceeds 50 Lakhs in any PY then TDS shall be deducted at the rate of 0.1% at the time of payment /credit to the seller account on sum exceeding 50 Lakhs.

This section not applicable on the transaction on which TDS deductable under any provisions of this act and TCS collectable u/s 206 C other than TCS collectable u/s 206 C (1H)

TCS on sale of goods u/s 206C(1H) (W.e.f 01.10.2020)

Seller whose Sales/Gross receipts/turnover/ exceeds 10 Cr in Previous Financial year and receives any sum for sale of goods from buyer and the value or aggregate of such value exceeding 50 lakhs in any previous year, TCS shall be collected at the rate of 0.1 % at the time of receipt of sum exceeding 50 Lakhs.

TCS not applicable if the buyer is liable to TDS under any other provision of this Act on the goods purchased by him from the seller and has deducted such amount.

Sale of Goods being exported out of India or goods covered in sub-section (1) /(1F) /(1G) in covered under this section.

Buyer does not include CG/SG/embassy/High Commission/legation/commission/consulate /trade representation of a foreign State/ local authority/ person importing goods into India/ any other person as the CG may notify in the Official Gazette.

Conclusion:-

Both the above sections applicable on one transaction 194Q prevails the 206 C (1H) hence seller shall obtain declaration shall be forms from the buyers for whether 194Q applicable to buyers or not.

If 194Q not applicable to buyer , Seller need to collect TCS u/s 206 C (1H).

If 194Q applicable to buyer , buyer need to deduct TDS u/s 194 Q.

To comply with above sections seller shall obtain the declaration from buyers in the beginning of financial year and if 194Q applicable to buyers and then no need to collect TCS u/s 206 C (1H) and vice versa.

Sample declaration template enclosed for your reference.

(ON THE LETTER HEAD OF CUSTOMER)

DECLARATION UNDER SECTION 194 Q – TDS ON PURCHASE OF GOODS

To,

M/s_________________.

Declaration

I,_______________________, Proprietor / Partner / Director / Authorized Signatory of M/s._________________________________________________________do hereby make the following declaration as to comply with the provision of Section 194 Q of the Income Tax Act, 1961 for Deduction of Tax at source on Purchase of Goods made from _______________.

1. Name entity ( Legal Entity Name ) :- ________________________________

2. Permanent Account Number :- ______________________________

3. TAN Number :-__________________________________________

4. FY 2020-21 Turnover :- ( )

a. Less Than 10 Cr

b. More Than 10 Cr

5. Whether purchase from Anuradha Auto Service Centre will be liable for deduct TDS u/s.194Q.

a. Yes

b. If answer of above is YES,then we will not Levy TCS u/s 206C (1H)

Verification

I the above named declarant do hereby verify that the contents of paragraphs is true and correct to best of my knowledge and belief . I am authorised to make above declaration for the provision of Income Tax Act 1961.

Place:-

Date: –

Name and Sign of the Declarant

Author Bio

Qualification: CA in Practice
Company: Peruri & Associates
Location: Visakhapatnam, Andhra Pradesh, India
Member Since: 12 Nov 2019 | Total Posts: 3
He is a qualified Chartered Accountant. He is a commerce graduate from IGNOU University. have 2 years post qualification experience at Visakhapatnam Branch of Hiregange & Associates . His core competencies have been in the area of Direct and Indirect Taxation. View Full Profile

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