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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
