Declaration u/s 194Q & 206C(1h) of Income tax

This query is : Resolved

Sanchit (Querist)
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13 June 2022 Dear Sir,
We are a manufacturing Company. Our Turnover for F.Y. 2020-21 was less than 10 Crore but in previous year i.e. 2021-22 our turnover was greater than 10 Crore.
We are currently facing 2 querries:
1) Now we have purchase some goods from a vendor and he has charged TCS in their E-invoice (without giving exemption of 50 Lakhs) and asking TDS Declaration for not charging TCS in further invoices.
Kindly provide such Declaration u/s 194Q as well as u/s 206C(1h).
2) We have received a letter from one of our Vendor u/s 206AB, 206AA & 206CCA under which he has mentioned that he has filed his ITR as per due dates. Kindly provide clarity against this letter.
Kindly resolve the above 2 querries at the earliest.

CA Rashmi Gandhi

CA Rashmi Gandhi (Expert)
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13 June 2022 Send me your mail id

Sanchit

Sanchit (Querist)
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14 June 2022 sanchit.tapariya@icai.org

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Sanchit

Sanchit (Querist)
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14 June 2022 Kindly resolve my query.

Sanchit

Sanchit (Querist)
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15 June 2022 Dear All,
Kindly reply to my query,
I need declaration u/s 194Q & u/s 206C(1h) for vendors & customer.
I need a common declaration letter for all vendors and likewise common declaration letter for all customers.
Kindly respond to my query at the earliest.

CA Rashmi Gandhi

CA Rashmi Gandhi (Expert)
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19 June 2022 Mailed it to you right now

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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20 July 2024 Certainly, let's address each of your queries regarding TDS under section 194Q and TCS under section 206C(1H) of the Income Tax Act, as well as the letter received from your vendor under sections 206AB, 206AA, and 206CCA.

### Query 1: Declaration under Section 194Q and Section 206C(1H)

#### Section 194Q (TDS on Purchase of Goods)

Section 194Q requires a buyer to deduct TDS at the rate of 0.1% on payments exceeding ₹50 lakhs made to a seller in a financial year for the purchase of goods. If your vendor has already charged TCS (Tax Collected at Source) on their e-invoice without providing an exemption under 206C(1H), they may request you to provide a declaration so that they do not charge TCS going forward.

**Declaration for Section 194Q**:
You can provide a declaration to your vendor stating that:
- Your turnover for the previous financial year (2021-22) exceeded ₹10 crores.
- Hence, you are liable to deduct TDS under section 194Q on qualifying transactions.
- Request them to not charge TCS under section 206C(1H) on future invoices.

**Sample Declaration:**
```
To,
[Vendor Name]
[Vendor Address]

Subject: Declaration under Section 194Q and Section 206C(1H)

Dear Sir/Madam,

This is to certify that our turnover for the financial year 2021-22 exceeded ₹10 crores. Therefore, we are liable to deduct TDS under Section 194Q of the Income Tax Act, 1961 on payments for purchase of goods made to you.

We request you to not charge Tax Collected at Source (TCS) under Section 206C(1H) on your invoices raised to us going forward, as we will comply with our TDS obligations under Section 194Q.

Thank you.

Yours sincerely,
[Your Company Name]
[Your Company Address]
```

#### Section 206C(1H) (TCS on Sale of Goods)

Section 206C(1H) requires a seller to collect TCS at the rate of 0.1% on consideration received from the sale of goods exceeding ₹50 lakhs in a financial year. If your vendor has charged TCS incorrectly or without considering exemptions, they may seek this declaration to correct future invoices.

### Query 2: Letter from Vendor under Sections 206AB, 206AA, and 206CCA

Your vendor has mentioned sections 206AB, 206AA, and 206CCA in their letter. These sections deal with higher TDS/TCS rates for non-filers of Income Tax Returns (ITR) or for transactions with non-residents.

- **Section 206AB**: Higher TDS rates apply if the deductee has not filed ITR for the past two years and the TDS deducted is likely to be ₹50,000 or more in each of those years.
- **Section 206AA**: Higher TDS rates apply if PAN is not provided by the deductee.
- **Section 206CCA**: Higher TCS rates apply if PAN/Aadhaar is not provided by the collectee.

**Response**:
You should verify if your vendor's compliance with these sections affects your TDS/TCS obligations when dealing with them. Typically, the higher rates under these sections are applicable when making payments to non-filers or non-providers of PAN/Aadhaar.

### Conclusion

Providing the necessary declarations under sections 194Q and 206C(1H) to your vendor will help clarify the correct tax treatment on invoices going forward. Regarding the letter from your vendor under sections 206AB, 206AA, and 206CCA, ensure compliance with applicable TDS/TCS rates based on their status. If in doubt, consult with a tax advisor or seek clarification from your vendor regarding their compliance status under these sections.