income tax
Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) play crucial roles in the revenue collection framework. Specifically, TDS on Purchase of Goods under Section 194Q and TCS on Sale of Goods under Section 206C(1H) are significant components. Many individuals struggle to differentiate between these two tax provisions. This guide aims to clarify these distinctions, detailing when and how much tax applies under each section.
| BASIS OF COMPARISON | TDS ON PURCHASE OF GOODS (SECTION 194Q) | TCS ON SALE OF GOODS (SECTION 206C(1H)) |
|---|---|---|
| Party Liable for Deduction / Collection | Buyer | Seller |
| Effective Date | 1st July 2021 | 1st October 2020 |
| Applicable to | Purchase of Goods from Residents | Sale of Goods to Residents |
| Turnover Limit for the Deductor / Collector | If the buyer’s turnover exceeds Rs. 10 crores in the preceding financial year | If the seller’s turnover exceeds Rs. 10 crores in the preceding financial year |
| Rate Applicable (When PAN is available) | 0.1% | 0.1% |
| Rate Applicable (When PAN is not available) | 5.0% | 1.0% |
| Transaction on which Tax is to be Deducted / Collected | On purchase of goods exceeding Rs. 50 lakhs | On sale of goods exceeding Rs. 50 lakhs |
| Time of Deduction / Collection | At the time of credit or payment, whichever occurs first | At the time of receipt of sales consideration |
| Time Period to Deposit / Collect | By the 7th of the subsequent month | By the 7th of the subsequent month |
| Preference to be given | Buyer is primarily liable to deduct tax if both provisions apply | Seller must collect tax if the buyer fails to deduct |
| Form (Quarterly Statement) to be filed | Form 26Q | Form 27EQ |
| Certificate Issued | Form 16A | Form 27D |
| Exemptions Available | Not applicable if: <br> I. Tax is collectible under 206C other than 206C(1H) <br> II. TDS is deductible under other sections | N/A |
In conclusion, TDS on Purchase of Goods (Section 194Q) and TCS on Sale of Goods (Section 206C(1H)) are governed by specific rules and rates that taxpayers must follow. By understanding the responsible party for deduction or collection, applicable turnover limits, and respective tax rates, individuals and businesses can ensure compliance with these provisions. Knowledge of these sections not only streamlines the tax process but also helps in avoiding potential legal complications.