Category: Income Tax
Who must deduct TDS: A buyer whose total turnover, gross receipts, or business revenue exceeded ₹10 crore in the preceding financial year.
Applicability: When a buyer purchases goods from a resident seller, and the aggregate value of purchases from that seller exceeds ₹50 lakh during the financial year.
Rate:
0.1% on the amount exceeding ₹50 lakh, if seller provides PAN.
5% if PAN/Aadhaar is not furnished.
Timing: Deduction is made at the time of payment or credit to the seller, whichever is earlier.
Under earlier law, a seller with turnover exceeding ₹10 crore had to collect TCS at 0.1% on goods sold exceeding ₹50 lakh in aggregate per buyer. This was done at the time of receipt of sale consideration.
However, effective April 1, 2025, this TCS provision under Section 206C(1H) has been removed. Sellers are no longer required to collect TCS on such transactions.
If both TDS (194Q) and TCS (206C(1H)) applied, TDS under Section 194Q took precedence, meaning the seller did not need to collect TCS once TDS was deducted.
| Provision | Who (based on turnover) | Trigger Condition | Rate & PAN Situation | Effective Date |
|---|---|---|---|---|
| Section 194Q (TDS) | Buyer (turnover > ₹10 cr) | Purchases from a seller > ₹50 lakh | 0.1% (or 5% if no PAN) | Effective from July 1, 2021 |
| Section 206C(1H) (TCS) | Seller (turnover > ₹10 cr) | Sales exceeding ₹50 lakh per buyer | 0.1% (or 5% if no PAN) | Removed effective April 1, 2025 |
Buyers (with turnover > ₹10 crore) must deduct TDS under Section 194Q on purchases from a single seller exceeding ₹50 lakh—at 0.1%, increased to 5% if PAN/Aadhaar isn’t provided.
Sellers no longer collect TCS under Section 206C(1H) since April 1, 2025.
In earlier years, if both TDS and TCS could’ve applied, TDS took precedence and relieved the seller from collecting TCS.