Difference Between Section 194Q and 206 C (1H) of the Income Tax Act, 1961

Mansi Bhatt | Updated: 15 April, 2022

What is Section 194Q of the Income Tax Act, 1961?

According to the provisions of Section 194Q of the Income Tax Act 1961, the buyer of the goods is obliged to deduct the TDS of the seller of the goods if the products purchased by the buyer from a specific seller have an annual value of Rs. 50,00,000/- or more.

What is Section 206C (1H) of the Income Tax Act?

The government has introduced a new section 206C (1H) through Finance Act 2020 to extend the TCS provisions to the seller of goods. As per this provision, a seller whose turnover is above Rs 10 crore is required to collect tax, when he receives more than Rs 50 lakh from one buyer during a financial year

Particular	Section 194Q of the Income Tax Act 1961	Section 206 C (1H) of the Income Tax Act, 1961
Who is Responsible?	Buyer	Seller
Applicable Form?	01/07/2021	01/10/2020
When to be deducted or Collected?	Payment or credit whichever is earlier	At the time of Receipt.
Rate of Tax	0.1%	0.1%

Analysis Of The Above Provision Under Various Scenarios

Case 1:

When the Buyer’s turnover > 10 Crore and Supplier’s turnover is = >10 Crore in the FY 2020-21

Buyer is required to deduct TDS @ 0.1% on the amount of purchase exceeding 50 Lakh.

Case 2:

When the Buyer’s Turnover is = > 10 Crore and Supplier’s turnover = < 10 Crore in the FY 2020-21

Buyer is required to deduct TDS @ 0.1% on the amount of purchase exceeding 50 Lakh.

Case 3:

When the Buyer’s Turnover is = < 10 Crore and Supplier’s turnover = < 10 Crore in the FY 2020-21

TDS and TCS Provision are not applicable.

Case 4:

When the Buyer’s Turnover is = < 10 Crore and Supplier’s turnover = > 10 Crore in FY 2020-21

Supplier is required to collect TDS @ 0.1% on the amount of purchase exceeding 50 Lakh

Section 194Q vs Section 206C (IH)