206CQ TDS – Sale of Goods, Rate & Collection Rules

Key Insights 

1. Section 206CQ requires sellers to collect a 0.1% TCS on sales over ₹50 lakh each year, with the tax collected at the time of sale.
    
2. If the buyer does not provide a PAN, the TCS rate rises to 1%, requiring the seller to collect more tax.
    
3. Sellers need to deposit the TCS within 7 days after the month it is collected to avoid penalties and interest charges each month.

If you are planning to send money abroad or make an international payment, it is important to understand the 206cq TDS section for compliance. This rule, which is different from section 206ct of Income Tax Act, requires tax to be withheld on certain large overseas payments.

You can think of Section 206CQ like a customs checkpoint for your money when it leaves India. 

If a bank or another authorised dealer processes a remittance above a certain limit (then how to make 0 tds water), then they have to hold back as much tax as possible with the 206cq of tcs by bank. This way, tax is collected in advance for the person sending the money.

Example:

I tell you my 206cq tds with example. I recently sent ₹9,00,000 overseas to pay for education. My bank, acting as the authorised dealer, followed the 206cq TDS section rules because the payment was for education. They took 5% TDS under the 206cq of income tax act foreign remittance, so they withheld ₹45,000 and processed a payment of ₹8,55,000. This 206cq TDS with example always help you.

Applicability of Section 206CQ

This rule covers all sales of goods, including exports and sales to the Government, unless one of the following exceptions applies:
 

• If a buyer purchases goods only for personal use and not for business, Section 206CQ does not apply.
• If the buyer acquires goods for resale or for use in manufacturing or processing, Section 206CQ does not apply.
• If the goods are covered by another section of the Income Tax Act, Section 206CQ does not apply.

Section 206cq of tcs by bank covers a wide range of cases, but it does not apply to goods bought for personal use, for resale, for manufacturing, or if another section covers them.

How Does Section 206CQ Work?

Section 206CQ requires sellers to collect a 0.1% tax (previously 0.075% until June 30, 2021) from buyers if the total value of goods sold or expected to be sold to a buyer in a financial year exceeds ₹50,00,000.

Sellers must collect this tax when they receive payment or when the buyer’s account is debited, whichever is earlier. If the buyer does not provide their PAN or Aadhaar number, the tax rate increases to 1%. If the buyer is not required to have a PAN or Aadhaar, no tax is collected under this section.

Sellers must submit Form 27EQ to the Income Tax Department within ten days after the month in which the tax is collected. This form should include details of the tax collected and paid to the government, along with the buyer’s PAN or Aadhaar number.

Bonus Tip: Under the Liberalised Remittance Scheme, 206CQLRS for other purposes is taxed at 5%. If you do not have a PAN or Aadhar, the tax rate increases to 10%.

Timeline for Collections and Payment Process

Sellers must submit collected taxes to the government within seven days after the month they are collected. The Income Tax Act explains how to comply, and Section 206CQ of income tax act foreign remittance gives more details to help sellers meet these rules. 

The tax administration is increasing its revenue by applying TDS rules to more transactions. Following Section 206CQ is important for sellers to avoid penalties and keep their businesses running smoothly.

Penalties for Non-Compliance with Section 206CQ

If you do not comply with section 206CQ of the Income Tax Act, you may face penalties and interest. The Act explains which penalties apply and how to appeal them. Sellers should be aware of these risks and follow the rules in section 206CQ.

Here are some of the main penalties for not following the 206CQ IT Act:

• Fines can range from ₹10,000 to ₹1,00,000, depending on how long the default lasts.
• Under Section 271H, a penalty of ₹10,000 may be charged if a purchaser does not provide a correct PAN or Aadhaar.
• If there is non-compliance, the penalty can be as much as the total tax that should have been collected at the source.

Sellers need to follow section 206CQ to avoid penalties. By complying with this section, tax collection becomes smoother.

It is important for sellers to review section 206CQ of the Income Tax Act and understand their responsibilities. Meeting these requirements helps sellers stay compliant and avoid penalties.

Conclusion
 

Section 206CQ says that TDS must be collected on high-value transactions to help with advance tax collection. Sellers can stay compliant and avoid penalties by knowing when the rule applies, meeting collection deadlines, and keeping PAN records current.

FAQs

TCS-206CT instead of TCS-206CQ? 

“TCS-206CT” and “TCS-206CQ” are challan codes used to deposit Tax Collected at Source (TCS) under Section 206C(1G) of the Income Tax Act in India. Each code applies to a specific type of foreign remittance.

How to correct the Financial Year for a TDS on Rent challan (Form 26QC) filed with the wrong FY? 

If you need to correct the Financial Year for a filed Form 26QC, you should submit a correction statement on the TRACES website. You can do this online, and you do not need to contact the bank since the payment has already been made.

Is TCS still required to be collected under section 206C(1) on the sale of scrap where the buyer has deducted TDS under section 194Q on the purchase of more than 50,00,000?  

No, the seller does not need to collect TCS under section 206C(1H) when selling scrap if the buyer has already deducted TDS under section 194Q for the same transaction. In this case, Section 194Q (TDS by the buyer) takes priority over Section 206C(1H) (TCS by the seller).

What is the meaning of TDS, and who is affected by it? 

TDS means Tax Deducted at Source. In this system, the government requires the person making a payment to deduct tax before paying the recipient. The deducted tax is then sent to the government for the recipient.

What are the exceptions to Section 206CQ?

Section 206CQ exempts certain goods and transactions, such as exports, imports, and trades in securities and commodities.