Which one Prevail Section 194Q and 206C (1H) of Income Tax Act, 1961

Finance Act, 2020 inserted section 206C(1H) Applicable from 01/10/2020

And Finance Act, 2021 inserted Section 194Q Applicable from 01-July-2021.

Section 206C(1H) – 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, at the time of receipt of such amount, collect from the buyer , a sum equal to 0.1% of the sale consideration exceeding fifty lakh rupees as income-tax.

Section 194Q – It applies to any buyer who is responsible for paying any sum to any resident seller for purchase of any goods of the value or aggregate of value exceeding fifty lakh rupees in any previous year. The buyer, at the time of credit of such sum in the account of the seller or at the time of payment, whichever is earlier, is required to deduct an amount equal to 0.1 % of such sum exceeding fifty lakh rupees as income tax.

1) Under section 194Q the buyer is liable to deduct the tax while under section 206C(1H) the seller is required to collect the tax.

2) 194Q and 206C(1H) applicable resident buyer or seller. This provision does not apply to the import and export of goods.

3) As per Section 194Q “buyer” means a person whose total sales, gross receipts, or turnover from the business exceeds Rs.10 Crores during the financial year immediately preceding the financial year in which the purchase of goods is carried out.

And as per sec. 206C (1H) "seller" means whose total sales, gross receipts or turnover exceeds Rs.10 crore during the financial year immediately preceding the financial year in which the purchase of goods is carried out.

4) As per Section 194Q tax to be deducted and as per section 206C (1H) tax to be collected.

5) Section 194Q is applicable on Buyer and Sec. 206C (1H) is applicable on Seller.

6) As per Section 194Q if PAN not provide by the seller then TDS rate 5% while as per Sec. 206C (1H) TCS rate 1%.

7) TDS and TCS Rate 5% if 2 years ITR not filed u/s 206AB.

8) Comparative Analysis

Seller Turn-over (In Crore)	Buyer Turn-over (In Crore)	Receipt or Payment for sale or purchase of Goods in prev-ious year (In Lakhs)	Amt. on which tax will be calcul-ated	TDS	TCS	Liable Person	Section under IT Act	Exclu-sion Section	Reason
11	9	55	5	NA	Applicable	Seller	206C(1H)	194Q	Buyer Turnover less than 10 Cr.
9	11	55	5	Applicable	NA	Buyer	194Q	206C(1H)	Seller Turnover less than 10 Cr.
11	11	55	5	Applicable	NA	Buyer	194Q	206C(1H)	194Q Prevail

Which one Section will prevail ?

It has been specified under sub sec. 5(b) that if TDS u/s 194Q is applicable than TCS u/s 206C(1H) will not be applicable.

If the buyer is required to deduct TDS under any other provisions of the Income Tax Act on the goods purchased by him from the seller and has deducted such amount, then the seller is not required to collect TCS on such transactions.

Note :

§ i) 206C (1H) Goods do not include exports and goods covered under section 206C(1)- TCS on sale of alcohol, tendu leaves, forest produce and scrap; 206C(1F)- TCS on sale of motor vehicles and 206C(1G)- TCS on foreign remittance.

§ ii) TCS is not required to be deducted if the buyer is Central/State Government, Embassy, High Commission, Legation, Consulate, Trade Representation of Foreign State or any local authority.

If tax is deductible under any other section

If tax is deductible under any other section, then tax shall be deducted under that section and not under section 194Q. Even when tax is deductible under any other section (but not actually deducted by the payer), TDS provisions of that section will apply and not TDS under section 194Q.

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