Income Tax B2B Trading Compliance

Section 194Q vs 206C(1H) TDS/TCS Calculator

Resolve the B2B trading dilemma on sale and purchase of goods exceeding ₹50 Lakhs. Instantly determines whether Buyer TDS (Section 194Q) or Seller TCS (Section 206C(1H)) applies based on the statutory ₹10 Crore preceding turnover hierarchy and CBDT Circular 13/2021 GST rules.

Standard B2B Trading Presets

Preceding Turnovers & Transaction Parameters

Enter preceding financial year turnover status and transaction values.

Preceding Financial Year Turnover (> ₹10 Crore)

Buyer Turnover in Preceding FY Exceeds ₹10 Crore?

Whether buyer's gross sales/turnover from business exceeded ₹10 Crore in the last FY.

Seller Turnover in Preceding FY Exceeds ₹10 Crore?

Whether seller's gross sales/turnover from business exceeded ₹10 Crore in the last FY.

Nature of Goods Transaction

Counterparty PAN Compliance Status

Prior Transactions with Party in Current FY (₹)

₹

Cumulative purchases/receipts with this party since 1st April of current FY.

Current Transaction / Invoice Amount (₹)

₹

Value of the current purchase invoice or payment installment.

GST Rate on Goods (%)

Section 194Q Timing / Basis

Statutory DeterminationTDS u/s 194Q

Section 194Q Overrules Section 206C(1H) — Buyer Deducts TDS

Both Buyer and Seller turnover exceed ₹10 Crore. Under Section 194Q(5) and the second proviso to Section 206C(1H), Section 194Q takes statutory precedence. The Buyer MUST deduct 0.1% TDS. The Seller CANNOT charge TCS.

Statutory Applicability & Net Cash Flow

Tax to Deduct / Collect₹1,000.00

Amount Subject to TDS / TCS: ₹10,00,000.00
Net Cash Payable by Buyer: ₹11,79,000.00
Remaining ₹50 Lakh Tax-Free Limit: ₹0.00

Applicable Tax Rate:0.10%

Statutory Declaration for Counterparty

Copy and send this official declaration to your trading partner:

DECLARATION REGARDING SECTION 194Q COMPLIANCE
To: [Seller Name / Vendor]
We hereby confirm that our total sales/gross turnover from business exceeded ₹10 Crore during the preceding Financial Year.
In accordance with Section 194Q of the Income Tax Act, 1961, we are deducting TDS @ 0.1% on purchases of goods exceeding ₹50 Lakhs.
Consequently, pursuant to Section 194Q(5) read with the second proviso to Section 206C(1H), you are requested NOT to charge/collect TCS under Section 206C(1H) on your invoices/receipts.
TDS will be deposited and Form 16A quarterly TDS certificates will be issued in due course.

Statutory Guidance & Audit Safeguards

•Golden Rule Applied: Since Buyer turnover > ₹10 Cr, Section 194Q overrules Section 206C(1H). Buyer must deduct TDS. Seller must NOT levy TCS.
•GST Exclusion (Circular 13/2021): Because TDS is deducted on credit/invoice booking and GST is shown separately, TDS is computed strictly on the basic price excluding GST.
•Cross-party Annual Declaration: It is best practice for buyers with turnover > ₹10 Cr to provide an annual written declaration to all suppliers at the beginning of the FY confirming Section 194Q deduction to prevent duplicate TCS billing.

How it works

Sections 194Q and 206C(1H) govern tax deduction and collection on transactions in goods exceeding ₹50 Lakhs in a Financial Year: 1. Statutory Turnover Thresholds: • Section 194Q (Buyer TDS): Applies if Buyer's turnover in the preceding Financial Year exceeded ₹10 Crore. • Section 206C(1H) (Seller TCS): Applies if Seller's turnover in the preceding Financial Year exceeded ₹10 Crore. • Transaction Value Threshold: ₹50,00,000 (₹50 Lakhs) aggregate value of goods purchased or sale consideration received during the current FY. 2. The Golden Hierarchy Rule (Section 194Q(5) vs Sec 206C(1H) Proviso): • When BOTH Buyer and Seller turnover exceed ₹10 Crore, Section 194Q OVERRULES Section 206C(1H). • The Buyer MUST deduct 0.1% TDS on the amount exceeding ₹50 Lakhs. • The Seller CANNOT collect TCS under Section 206C(1H). • If Buyer turnover is ≤ ₹10 Crore but Seller turnover > ₹10 Crore, the Seller MUST collect 0.1% TCS on receipts exceeding ₹50 Lakhs. • If both turnovers are ≤ ₹10 Crore, neither provision applies (0% tax). 3. Treatment of GST (CBDT Circular No. 13/2021): • Section 194Q (Credit / Invoice Basis): If TDS is deducted at the time of invoice booking and GST is indicated separately in the invoice, TDS is computed strictly on the basic price excluding GST! • Section 194Q (Advance Payment Basis): If payment is made before invoice generation, TDS is deducted on the gross payment amount including GST. • Section 206C(1H) (Receipt Basis): TCS is collected on the receipt of consideration, which includes GST. 4. Penal Rates for Non-Compliance: • Invalid or missing PAN: 5.0% TDS under Section 206AA; 1.0% TCS under Section 206CC. • Specified ITR non-filers: 5.0% rate under Section 206AB / 206CCA.

Example

Example: A buyer firm (turnover ₹45 Cr) purchases goods worth ₹11,80,000 (Basic ₹10,00,000 + 18% GST ₹1,80,000) from a seller (turnover ₹25 Cr). Prior purchases this FY are ₹50,00,000. • Since Buyer turnover > ₹10 Cr, Section 194Q overrules Section 206C(1H). • Cumulative purchases cross ₹50 Lakh threshold by ₹10,00,000 basic value. • Under Circular 13/2021, TDS is deducted on basic value excluding GST: ₹10,00,000 × 0.1% = ₹1,000 TDS. • Buyer pays Seller: ₹11,80,000 - ₹1,000 = ₹11,79,000. • Seller does not charge TCS on the tax invoice.

Frequently asked questions

What is the key difference between Section 194Q and Section 206C(1H)?

Section 194Q requires the BUYER to deduct TDS (0.1%) at the time of purchase or payment for goods exceeding ₹50 Lakhs if the buyer's turnover exceeds ₹10 Crore. Section 206C(1H) requires the SELLER to collect TCS (0.1%) at the time of receipt of sale consideration exceeding ₹50 Lakhs if the seller's turnover exceeds ₹10 Crore.

If both Buyer and Seller turnovers exceed ₹10 Crore, who must act?

Section 194Q takes statutory precedence. Under Section 194Q(5) read with the second proviso to Section 206C(1H), the buyer must deduct TDS u/s 194Q, and the seller cannot collect TCS u/s 206C(1H). The buyer should issue an intimation declaration to the seller confirming Section 194Q compliance.

Is Section 194Q TDS deducted on basic value or gross value including GST?

CBDT Circular No. 13/2021 clarified that if TDS is deducted at the time of credit to the seller's account (invoice booking) and GST is shown separately, TDS is deducted on the basic value excluding GST. However, if advance payment is made before invoice booking, TDS is deducted on the gross payment amount.

Is Section 206C(1H) TCS collected on basic value or gross consideration including GST?

Under Section 206C(1H), tax is collected on 'receipt of consideration'. Consideration legally includes GST. Therefore, TCS u/s 206C(1H) must always be calculated on the gross receipt inclusive of GST.

What happens if the seller does not provide a valid PAN?

If the seller fails to furnish a valid PAN, Section 206AA mandates a higher TDS rate of 5.0% instead of the regular 0.1%. For TCS u/s 206C(1H), missing PAN attracts a 1.0% rate under Section 206CC.

Are import and export transactions covered under 194Q or 206C(1H)?

No. Import of goods from outside India is subject to customs duty and Bill of Entry clearance, and is exempt from Section 194Q. Similarly, export of goods out of India is zero-rated and expressly excluded from Section 206C(1H).