/ Blog · Section 206C(1H) TCS · Updated 2026-10-12
Section 206C(1H), seller-side TCS on goods.
Finance Act 2020 introduced Section 206C(1H) effective 1 October 2020: a seller with annual turnover above INR 10 crore in the preceding FY must collect 0.1% TCS on sale of goods to a buyer where aggregate sales exceed INR 50 lakh in the FY. In 2021, Section 194Q (buyer TDS) was introduced on the same transactions — the overlap rules are precise. Here's the full practitioner's guide.
Written by CA Durgesh Chavda
Chartered Accountant (ICAI) · Founder, Bharat Quantum Prospera · US incorporation, India-US DTAA, FEMA ODI, NRI taxation, cross-border structuring · LinkedIn
/ Section 206C(1H) core rule
Seller-side TCS.
Section 206C(1H) applies when:
- Seller — any person whose aggregate turnover / receipts / sales in the immediately preceding FY exceeded INR 10 crore.
- Buyer — any Indian resident buyer of goods.
- Sales threshold — aggregate sales to that buyer in the current FY exceed INR 50 lakh.
- TCS collected at 0.1% of the amount in excess of INR 50 lakh.
Timing of collection: at the time of receipt of the amount from the buyer.
PAN non-availability: if buyer does not provide PAN, Section 206CC kicks in — rate becomes 1% (not 5% unlike 194Q, note the asymmetry).
Exempt transactions: export of goods (outside India), sale to government, sale subject to TCS under other 206C sub-sections (e.g., 206C(1) on alcoholic liquor / scrap / minerals), sale where buyer deducts 194Q TDS (overlap rule).
/ Section 194Q vs 206C(1H) overlap
Who collects / deducts.
Both sections cover the same transaction type (sale of goods). Both have INR 10 crore turnover thresholds and INR 50 lakh transaction thresholds. Both have 0.1% rate.
Rule: Section 194Q (buyer TDS) takes precedence. If both would apply, buyer deducts 194Q and seller does NOT collect 206C(1H).
Combinations:
| Buyer | Seller | Who acts |
|---|---|---|
| Turnover > 10 cr | Turnover > 10 cr | Buyer deducts 194Q. Seller does not collect 206C(1H). |
| Turnover > 10 cr | Turnover < 10 cr | Buyer deducts 194Q. 206C(1H) does not apply. |
| Turnover < 10 cr | Turnover > 10 cr | Seller collects 206C(1H). 194Q does not apply. |
| Turnover < 10 cr | Turnover < 10 cr | Neither applies. |
Written communication between buyer and seller at start of FY: 'We will deduct 194Q under Finance Act 2021' or 'We will collect 206C(1H)' prevents duplicate deduction + collection.
/ Compliance workflow for sellers
Quarterly cycle.
- Confirm seller eligibility: preceding FY turnover > INR 10 crore → 206C(1H) applicable.
- Identify buyers with > INR 50 lakh purchases from you: review sales register, track cumulative per buyer.
- Request buyer PAN: without PAN, rate is 1% under Section 206CC.
- Determine 194Q override: is the buyer 194Q-liable? Request written confirmation of buyer's turnover > INR 10 crore. If yes, buyer deducts 194Q; you do NOT collect 206C(1H).
- Collect 0.1% TCS at receipt on amounts above INR 50 lakh cumulative per buyer in FY.
- Deposit TCS by 7th of the following month.
- File Form 27EQ quarterly (Q1 by 15 July, Q2 by 15 October, Q3 by 15 January, Q4 by 15 May).
- Issue Form 27D to buyer within quarterly timeline. Buyer claims TCS credit on their ITR.
/ Common 206C(1H) compliance mistakes
Where sellers trip.
- Double collection + deduction: not confirming buyer's 194Q applicability. Buyer deducts 194Q and seller also collects 206C(1H). Buyer refund requires manual process.
- No PAN from buyer: rate jumps from 0.1% to 1% under Section 206CC.
- Missing cumulative tracking: INR 50 lakh is cumulative per buyer per FY. Partial-year tracking causes under-collection.
- 206C(1H) on exempt transactions: collecting on exports (exempt), government sales (exempt), or sales already under 206C(1) sub-sections (alcoholic liquor / scrap / minerals have specific TCS). Over-collection.
- Timing error: 206C(1H) collection is at RECEIPT, not at invoice. If payment is deferred, TCS not collected till payment is received.
- Not issuing Form 27D: buyer cannot claim TCS credit; relationship suffers; buyer may push back on TCS collection.
- Not filing Form 27EQ quarterly: late-filing fee Section 234E at INR 200 per day; Section 271H penalty.
Last updated: 2026-10-12.
/ Ready when you are
Seller with turnover > INR 10 crore? Section 206C(1H) tracks every buyer.
Quarterly compliance: 194Q overlap analysis per buyer, cumulative sales tracking, Form 27EQ filing, Form 27D issuance. BQP annual engagement scopes the full TDS + TCS compliance stack for mid-size and large sellers.
FAQ
Common questions, answered.
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