TDS on Purchase of Goods & TCS on Sale of Goods: When & How much is it Applicable?
The Tax Deducted at Source and Tax Collected at Source are the important components of the revenue collection system. The TDS on Purchase of Goods (Section 194 Q) and TCS on Sale of Goods (Section 206 C (1H)) are the major sources under the system. Majority of individuals face problems in understanding the difference between TDS on Purchase of Goods and TCS on Sale of Goods. This guide aims to clarify the key distinctions, ensuring a clear understanding of when and how much tax is applicable under each section.
Difference between TDS on Purchase of Goods and TCS on Sale of Goods
| BASIS OF COMPARISON | TDS ON PURCHASE OF GOODS (SECTION 194Q) | TCS ON SALE OF GOODS (SECTION 206C(1H)) |
| Party Liable for Deduction / Collection | Party buying Goods (Buyer) | Party selling Goods (Seller) |
| Effective Date | 1st July 2021 | 1st October 2020 |
| Applicable to | Only on Purchase of Goods from Residents | Only on Sale of Goods to Residents |
| Turnover Limit for the Deductor / Collector | The buyer’s turnover (total sales) exceed Rs. 10 crores in the preceding financial year | The seller’s turnover (total sales) exceed Rs. 10 crores in the preceding financial year |
| Rate Applicable (When PAN is available) | 0.1% | 0.1% |
| Rate Applicable (When PAN is not available) | 5.0% | 1.0% |
| Transaction on which Tax is to be Deducted / Collected | On purchase of goods where the purchase amount exceeds Rs. 50 lakhs | On sales of goods where the sales amount exceeds Rs. 50 lakhs |
| Time of Deduction / Collection | Deducted at the time of credit or payment whichever is earlier | Collected at the time of receipt of sales consideration |
| Time period to Deposit / Collect | To be deposited by 7th of the subsequent month | To be deposited by 7th of the subsequent month |
| Preference to be given | Purchaser is first liable to deduct the tax if the transaction could be subject to both 206C(1H) | Seller shall be liable to collect tax if purchaser is not liable to deduct tax or if he has failed to deduct the tax |
| Form (Quarterly Statement) to be filed | Form 26Q | Form 27EQ |
| Certificate Issued | Form 16A | Form 27D |
| Exemptions Available | It is not applicable if:
I. Tax is collectible under 206C other than the 206C(1H) II. TDS is deductible under any other sections |
Conclusion: In summary, TDS on Purchase of Goods (Section 194Q) and TCS on Sale of Goods (Section 206C(1H)) have specific applicability criteria and rates that taxpayers must adhere to. By understanding the party responsible for deduction or collection, the applicable turnover limits, and the respective rates, individuals and businesses can ensure compliance with these tax provisions. Proper knowledge of these sections helps streamline the tax process and avoid potential legal complications.
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