The Ministry of Finance through the Finance Act 2021, introduced certain new sections impacting the tax withholding provisions, which are being made effective from 01.07.2021. The changes are as follows
TDS u/s 194Q versus TCS u/s 206C(1H)
| Particulars | TDS u/s 194Q | TCS u/s 206C(1H) |
| Applicability | Applicable w.e.f. 01.07.2021 | Applicable w.e.f. 01.10.2020 |
| Triggering Point (Conditions) | Gross turnover from the business carried by BUYER should exceed INR 10 crores during previous financial year (FY).Purchase of goods of aggregate value exceeding INR 50 Lakhs in current financial year from a particular seller. | Gross turnover from the business carried on by SELLER should exceed INR 10 crores during previous financial year. Sale consideration received exceeds INR 50 Lakhs in current financial year to a particular buyer. |
| Not Applicable to certain transactions | Transactions on which TDS is applicable under other provisions of the Act.Transactions on which TCS is applicable under section 206C other than 206C(1H) | Transactions on which the buyer is liable to deduct tax at source under any other provision of this Act, including Section 194Q.Transaction in which buyer is Government Local Authority Importer of the goods |
| Rate of TDS/ TCS | 0.1 % of the sum in excess of Rs. 50 Lakhs | 0.1 % of the sales consideration in excess of Rs. 50 Lakhs |
| Point of Taxation | At the time of payment or credit, whichever is earlier | At the time of receipt of amount from the buyer |
| Quarterly return in Form | Form 26Q | Form 27EQ |
CASE : Seller “A” sells good to Buyer “B” where both the Buyer and Seller satisfies the conditions laid down under respective sections:
The applicability of TDS u/s 194Q and TCS u/s 206C(1H) can be summarized with the below table:
| Conditions | Case 1 | Case 2 | Case 3 |
| Seller satisfies condition | Yes | No | Yes |
| Buyer satisfies condition | No | Yes | Yes |
| Consequence | TCS u/s 206C(1H) | TDS u/s 194Q | TDS u/s 194Q |
Introduction of Section 206AB and Section 206CCA
