My buyer deducts TDS on my invoice and I also collect TCS on the same sale. Which of us is right?
Where both could apply, section 194Q prevails and the seller does not collect — that is what CBDT Circular 13/2021 says. The question is now largely historical for current transactions, because section 206C(1H) was withdrawn with effect from 1 April 2025, leaving only the buyer's 0.1% deduction under 194Q.
Section 194Q applies to a buyer carrying on business whose total sales, gross receipts or turnover exceeded Rs. 10 crore in the financial year immediately preceding, who pays a resident seller for the purchase of goods of the value or aggregate value exceeding Rs. 50 lakh in a previous year. The rate is 0.1% of the sum exceeding Rs. 50 lakh, with no surcharge or cess. Deduction is at the time of credit to the seller's account or at the time of payment, whichever is earlier, and a credit to a suspense account counts. The section was inserted with effect from 1 July 2021.
Section 194Q(5) is the traffic rule inside the section: it does not apply to a transaction on which tax is deductible under any other provision of the Act, or collectible under section 206C other than a transaction to which section 206C(1H) applied. The carve-out from the carve-out is what made 194Q override 206C(1H).
CBDT Circular 13/2021 dated 30 June 2021 set out the working rules. Where both 194Q and 206C(1H) could apply, section 194Q prevails and the seller does not collect; section 194-O overrides both; once deduction has been made the seller cannot collect on the same transaction. The Rs. 50 lakh trigger was to be computed from 1 April 2021. Where the sum is credited and GST is shown separately in the agreement, deduction is on the amount excluding GST, but where deduction is on payment because payment precedes credit, it is on the whole amount. Tax deducted on goods later returned may be adjusted against the next purchase from the same seller, and no adjustment is needed if the seller replaces the goods. The section does not apply to a non-resident buyer whose purchase is not effectively connected with a permanent establishment in India, nor to a buyer whose income is wholly exempt, nor to a buyer in the year of its incorporation, since that buyer has no preceding-year turnover.
The interplay has now been resolved by deletion. The department's own TCS page records that section 206C(1H) "is withdrawn with effect from 01-04-2025", and its note on TDS on purchase of goods states that under the law effective 1 April 2025 the provisions of section 206C(1H) are not applicable. For purchases from 1 April 2025 onwards, therefore, there is one obligation and it sits on the buyer.
The question still matters for open years. Assessments, section 201 proceedings and appeals for FY 2020-21 to FY 2024-25 continue under the 1961 Act, and Circular 13/2021 remains the governing guidance for those years — including the double-collection cases where both parties acted.
From 1 April 2026 the obligation is carried into serial 8(ii) of the table to section 393(1) of the Income-tax Act, 2025 — 0.1% with a Rs. 50 lakh threshold — with no separate seller-side collection on ordinary goods.
For four financial years buyers and sellers ran parallel obligations on the same invoices, and the resulting mismatches are still being reconciled in 26AS and in section 201 proceedings. Knowing that 194Q prevailed lets you identify which party carried the default, and lets a seller who over-collected explain the position rather than pay again.
My advertising agency bills the advertiser, remits the money to me, and I pay it fifteen per cent back as its margin. The agreement calls it commission. Is that section 194H?
We book rooms and banquet facilities for staff and clients and the hotel bills us monthly. Is that a contract for work on which we have to deduct under section 194C?
We run an e-auction platform. Buyers pay the sellers directly and no sale consideration passes through us. Are we still bound to deduct under s.194-O on the gross amount, and is there any way to raise the difficulty with the Board?
The TDS officer says our consultant doctors are really employees, that their fees are salary, and that we should have deducted under s.192 instead of s.194J. Is he right?
The faceless unit has disallowed my purchases for not deducting under s.194Q and has said nothing at all about the Board's circular I quoted in my reply. Is that enough to get the order set aside?
Tax was deducted in my PAN under s.194Q on the whole mandi turnover, but I am a kachha arahtiya and I only offer my commission to tax. CPC has cut my TDS credit down in proportion. Can I still claim the whole deduction?
I sell on a marketplace. The operator deducted under section 194-O on my gross sales, but I reported turnover net of sales returns, and the CPC has allowed me only proportionate TDS credit under Rule 37BA. How do I get the rest?
The Assessing Officer has disallowed 30 per cent of my purchases under s.40(a)(ia) for not deducting s.194Q TDS, but the seller had already collected TCS under s.206C(1H) and it shows in my Form 26AS. Does that answer the disallowance?
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