Section 206C(1H)

Section 206C(1H) — the law in short

What the courts have decided on section 206C(1H), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Vijaya Agro Traders v ITO High CourtHelps taxpayerNo later treatment found
  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?
  Yes. The Karnataka High Court set aside an order under s.143(3) read with s.144B, made in a s.194Q scrutiny, on the single ground that CBDT Circular No. 13/2021 had not been considered or appreciated by the assessing unit, and remitted the matter for fresh consideration in the light of that circular. Guidelines issued under s.194Q(3) are issued with the approval of the Central Government and the officer is not free to pass over them in silence.
• Mohammad Yunus v ITO, Ward-1 & TPS, Kalaburagi ITATHelps taxpayerNo later treatment found
  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?
  Yes, in principle. The Tribunal held that where the seller has already collected tax at source under s.206C(1H) on the same transaction, the Board's instructions on s.194Q are clear that no deduction under s.194Q is required, and restored the matter to the Assessing Officer to verify the Form 26AS entries. The concession comes from para 4.9.5(v) of CBDT Circular No. 13/2021 and is available only for the years in which s.206C(1H) was in force — in practice AY 2022-23 to AY 2025-26.
• Statutory position — s.206AB and s.206CCA omitted, and s.206C(1H) disapplied, from 1 April 2025 CBDT Circulars & InstructionsCuts both ways
  Do I still have to run the compliance check and deduct at the higher non-filer rate, and does my client still have to collect TCS on his sales of goods?
  No to both, for anything on or after 1 April 2025. Section 206AB and section 206CCA were omitted by the Finance Act 2025 with effect from 1 April 2025 and no longer exist. Section 206C(1H) has not been omitted from the statute book, but a third proviso inserted by the Finance Act 2025 provides that nothing contained in that sub-section shall apply from 1 April 2025, and the department's own guidance states that the provisions of s.206C(1H) are not applicable from that date and that s.194Q applies to the sale of goods.
• Statutory position — s.194-O: the e-commerce operator's rate fell to 0.1 per cent on 1 October 2024 CBDT Circulars & InstructionsCuts both waysNo later treatment found
  What rate does an e-commerce operator deduct now, when is a small seller outside the section, and does the Board's guidance bind me?
  0.1 per cent of the gross amount of the sale or services, for anything on or after 1 October 2024; one per cent before that. No deduction is required where the e-commerce participant is an individual or HUF whose gross sales or services through the platform in the previous year do not exceed five lakh rupees and who has furnished PAN or Aadhaar to the operator. Guidelines issued by the Board under s.194-O(4) bind the income-tax authorities and the e-commerce operator alike.
• CBDT Circular 13/2021 CBDT Circulars & InstructionsCuts both ways
  Our purchase attracts both 194Q and 206C(1H). Do we deduct as buyer or does the seller collect?
  The buyer deducts. Where both provisions are capable of applying to the same transaction, the buyer's obligation under s.194Q prevails and the seller need not collect under s.206C(1H); if the seller has already collected before the buyer deducts, the transaction is not taxed twice, both rates being 0.1%.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.