TDS v/s TCS – A brief comparison

Mansi Bhatt | Updated: 2 April, 2022

The Finance Act, 2020 had introduced Section 206C (1H) for levy of Tax collected at source (TCS) on sale of goods by a seller from a buyer & thereafter the Finance Act, 2021 has introduced Section 194Q to provide for deduction of tax (TDS) by a buyer from the purchase of goods”.

TDS on purchase of goods under Section 194Q w.e.f. (01/07/2021)

TCS on Sale of Goods under Section 206C (1H) w.e.f. (01/10/2020)

As per Section 194Q of the Income Tax Act, 1961, any person, being a buyer who is responsible for paying any sum to any resident for purchase of any goods of the value where aggregate of such value exceeds Rs. 50 Lacs in any previous year, shall at the time of credit of such sum to the account of the seller or at the time of payment thereof by any mode, whichever is earlier, deduct an amount equal to 0.1 per cent of such sum exceeding Rs. 50 Lacs as income-tax (TDS).

As per Section 206 C (1H) of the Income Tax Act, 1961, every person, being a seller, who receives any amount as consideration for sale of any goods of the value or aggregate of such value exceeding fifty lakh rupees in any previous year, other than the goods being exported out of India or goods covered in sub-section (1) or sub-section (1F) or sub-section (1G) shall, at the time of receipt of such amount, collect from the buyer, a sum equal to 0.1 per cent of the sale consideration exceeding fifty lakh rupees as income-tax” (TCS)

Buyer means a person whose total sales, gross receipts or turnover from the business carried on by him exceed Rs.10 crores during the financial year immediately preceding the financial year in which the purchase of goods is carried out

Seller means a person whose total sales, gross receipts or turnover from the business carried on by him exceed ten crore rupees during the financial year immediately preceding the financial year in which sale of goods is carried out

Further it is clarified that where provisions of both TCS on sale of Goods u/s 206C(1H) and TDS on purchase of Goods u/s 194Q are applicable, provisions of TDS u/s 194Q shall prevail.

Comparison between Section 194Q and 206C(1H)

Criteria	TDS on Purchase of Goods Section 194Q	TCS on Sale of Goods Section 206C (1H)
Who is Liable	Buyer is liable to deduct the tax	Seller is liable to collect the tax
Effective Date	01/07/2021	01/10/2020
Turnover Limit	Turnover > 10 Cr in the preceding financial year	Turnover > 10 Cr in the preceding financial year
Threshold Limit	Purchases from Seller > 50 Lacs during the financial year	Sales to buyer > 50 Lacs during the financial year
Rate	0.1% of Purchase Value > 50 Lacs during the financial year	0.1% of Sales Receipts > 50 Lacs during the financial year
Time of deduction	Credit or Payment – whichever is earlier	At the time of receipt
If PAN not available*	5%	1%
Quarterly Statement to be filed	Form 26Q	Form 27EQ
Certificate to be Issued	Form 16A	Form 27D

*In the absence of PAN, section 206C(1H) read with section 206CC provides for TCS @1%”. However, section 206CCA provides for TCS @5% duly considering provisions of section 206CC”.