in Tax and Accounting Law
Asked July 20, 2021

Income Tax

  • 1 Answer

This is with regard to provisions in the Income Tax Act. There is a new section 194Q that has been added for TDS. There is also a provision for TCS under Section 206C(1H). But both provisions seem similar so which will apply when and what's the difference?

Answer 1

Section 194Q states that when payment is made by the buyer for the purchase of goods valued at more than Rs. 50 lakhs, tax will be deductible (TDS). On the other hand, Section 206C(1H) states that when a seller receives consideration for sale of goods valued at more than Rs. 50 lakhs, tax will be collectible (TCS). Both sections also define who a buyer and seller is, stating that a person who has total sales or gross receipts or turnover in the preceding financial year is a buyer or seller. 

Now, there can be situations where one of the sections might not apply due to the fact that the total sales or gross receipts or turnover of the buyer/seller did not exceed Rs. 50 lakhs. So before Section 194Q was introduced, if the seller’s total sales in the preceding year did not exceed Rs. 50 lakhs, such transactions escaped tax collection. But now, since the buyer’s total sales is also brought into question by Section 194Q, such transactions will be included if the definition of ‘buyer’ is met. Therefore, before the inclusion of Section 194Q, it was only the seller’s total sales that mattered, but now the buyer’s total sales have also been brought in to increase transactions that come under tax purview.

But note that the two sections are mutually exclusive. Both can’t apply at the same time. If one starts to apply, the other will not.

Agree Comment 0 Agrees 6 months ago

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