Brief Analysis of Section 194Q & Section 206C(1H)
Section 194Q is applicable with effect from 1st July 2021. This article gives a brief note on provisions of Section 194Q [TDS on Purchase of Goods] and its comparison & interplay with Section 206C(1H) [TCS on Sale of Goods].
First Let us understand provisions of Section 194Q for TDS on Purchase of Goods:
Person Responsible for Deducting TDS
Buyer is responsible for paying to any resident for the purchase of goods of the value or aggregate of such value in excess of Rs 50 Lakh in any previous year is liable to deduct TDS.
- The provisions of this section will be applicable to the Buyer if the turnover of Buyer is more than Rs 10 Crore during the Financial Year immediately preceding the Financial Year in which the purchase takes place.
- If Seller has PAN: 0.1%
- If the Seller does not has PAN: 5%
Section 206C(1H) for TCS on Sale of Goods was introduced by inserted by the Finance Act 2020, w.e.f. 1-10-2020. Finance Act 2021 introduced Section 194Q which deals with TDS on Purchase of Goods. Section 194Q is applicable with effect from 1st July 2021. If we carefully try to draw a basic difference on these two provisions is, Section 206C(1H) casts responsibility of collecting TCS on Sale of Goods on Seller and Section 194Q casts responsibility of deducting TDS on Buyer in case of Purchase of Goods.
Please note that If any transaction attracts TCS under section 206C(1H) and TDS under section 194Q, then TDS under section 194Q will be applicable. But if TCS is liable to be collected under any other provisions of Section 206C, then TDS under section 194Q will not be applicable
This Interplay can be understood by the below-mentioned Examples:
|Particular||Scenario 1||Scenario 2||Scenario 2|
|Buyer’s Turnover||Rs. 11 Cr||Rs. 9 Cr||Rs. 11 Cr|
|Seller’s Turnover||Rs. 9 Cr||Rs. 11 Cr||Rs. 11 Cr|
|Purchase Value||Rs. 51 Lakh||Rs. 51 Lakh||Rs. 51 Lakh|
|TDS u/s 194Q||0.1% on Rs. 1 Lakh||Not Applicable as Buyer’s Turnover is Less the Rs. 10 Cr.||0.1% on Rs. 1 Lakh|
|TCS u/s 206(1H)||Not Applicable as Seller’s Turnover is Less the Rs. 10 Cr.||0.1% on Rs. 1 Lakh||Not Applicable due to exception carved out (See 5th FAQ)|
Please note that the Rate of TCS u/s 206(1H) if the PAN of the Buyer is not available.
One May Also note that Section 194Q makes no distinction between Capital goods or stock in trade. Provisions of Section 194Q will be equally applicable on the Purchase of Capital Goods if the transaction qualifies monetary limits specified in the Section.
What to do when on a Transaction TDS is liable to be deducted under any other Section and provisions of TDS u/s 194Q are also applicable?
If TDS is liable to be deducted under any other section of Income Tax, then provisions of Section 194Q will not be applicable.